HEYMAN et al v. CITIMORTGAGE, INC.
Filing
128
OPINION. etc. Signed by Judge Kevin McNulty on 6/27/2019. (dam, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ABRAHAM S. HEYMAN and
GEULA HEYMAN,
Civ. No. 14-1680-KM-MAR
Plaintiffs,
OPINION
CITIMORTGAGE, INC.,
Defendant.
KEVIN MCNULTY, U.S.D.J.:
I.
Introduction
Abraham and Geula Heyman, husband and wife, represented at all
relevant times by counsel, have brought this action against their mortgage
servicer, Citimortgage, Inc. (“Citi”). On October 5, 2006, the Heymans obtained
a $435,000 mortgage at a fixed interest rate of 6.75%. They occupied one part
of the mortgaged two-family home, and apparently maintained the other as an
income-producing rental apartment.
Tn 2011, the Heymans stopped making monthly mortgage payments. By
September 2012, they were some $62,000 in arrears. At about that time, they
proposed a short sale of the property. The reason for seeking a short sale,
testified Mr. Heyman, was that his family was growing, and he wished to “walk
away” from this mortgage and move to a bigger home. Citi made a proposal
pursuant to which a short sale of the property for $235,000 would be deemed
to satisfy the outstanding balance of $400,000. The Heymans did not agree
because they objected to Citi’s requirement that they contribute $5000 in cash.
In mid-2013, with the advice and participation of counsel, the Heymans
requested from Citi a loan modification under the Department of Treasury’s
Rome Affordable Modification Program (“RAMP”). In keeping with HAMP
guidelines, they were required to make three trial payments during the months
of June, July, and August of 2013. Following successful completion of the trial
1
payments, Citi would offer an agreement for permanent modification of the
loan.
The Heymans successfully made three RAMP trial payments in the
months of June, July, and August of 2013 (as well as a payment in May, the
status of which is disputed). Citi therefore presented the Heymans with a
proposed modified loan agreement. The Heymans executed the agreement, and
the loan was modified as of August 1, 2013. The then-outstanding principal
balance was reduced from $516,662.50 to $341,350.80; the interest rate of
6.75% was reduced to 5.25%. The Heymans made one regular payment under
the loan modification agreement in September 2013, but made no further
payments.
The Heymans make many objections to the effect that the modification
agreement they signed was not HAMP-compliant. Chief among them is the
objection that the monthly payment calculated by Citi exceeded 31% of their
monthly income. They point to inconsistencies in Citi’s statements about their
monthly income, but have declined to offer evidence or even state what their
monthly income was.
In 2014, the Heymans moved out of their portion of the two-family
house, and they now live elsewhere. Since then, they have maintained the
house as an income-producing property, collecting rent on the two apartments.
Except for the payments made in connection with the trial period and loan
modification in 2013, they have made no payments of principal, interest, or
taxes in the eight years since 2011.
The Heymans’ Second Amended Complaint asserts eight causes of action
against Citi: (1) violation of the New Jersey Consumer Fraud Act (“CFA”); (2)
promissory estoppel; (3) conversion; (4) negligent misrepresentation; (5) breach
of contract; (6) unjust enrichment; (7) slander of title; and (8) violation of the
Real Estate Settlement Procedures Act (“RESPA”). The Heymans allege
primarily that they were orally promised a 2% interest rate, but the written
loan modification agreement they signed imposed a rate of 5.25%; that the
monthly mortgage payment exceeded 31% of the Heymans’ monthly gross
2
income, in violation of HAMP guidelines; that late fees were not waived; and
that an appraisal fee should not have been assessed.
Before the Court are two motions filed by Citi:
(1) a motion for summary judgment (DE 104); and
(2) a motion to assign rental income, or, in the alternative, to appoint a
rent receiver (DE 103).
For the following reasons, Citi’s motion for summary judgment is
granted. Citi’s motion for the assignment of rental income, or to appoint a rent
receiver, is denied.
II.
Home Affordable Modification Program (HAMP)
Before addressing the merits, I provide some background on HAMP and
its guidelines, which governed the terms of the loan modification granted by
Ciii in 2023.
In response to the downturn in the financial markets in 2008, Congress
enacted the Emergency Economic Stabilization Act of 2008 (“EESA”). P.L. 110—
343, 122 Stat. 3765, 12 U.S.C.
§ 5201—5261;
see Wigod v. Wells Fargo Bank,
N.A., 673 F.3d 547, 556 (7th Cir. 2012). The “centerpiece” of the EESA “was the
Troubled Asset Relief Program (TARP), which required the Secretary of the
Treasury
.
.
.
to ‘implement a plan that seeks to maximize assistance for
homeowners and
.
.
.
to take advantage of.
encourage the seiwicers of the underlying mortgages
.
.
available programs to minimize foreclosures.” Wigod,
673 F.3d at 556 (quoting 22 U.S.C.
§ 52 29(a)).
In February of 2009, the Secretary of the Treasury set aside $50 billion
in TARP funds to induce lenders to refinance mortgages with more favorable
interest rates to help homeowners avoid foreclosure. Id. The Secretary
negotiated Servicer Participation Agreements with home loan seiwicers. Under
those agreements, servicers agreed to identify homeowners in default and to
modify those homeowners’ loans under the program. Id. For each modification,
loan servicers received a $1,000 payment, as well as other incentives. Id.
3
Also in February of 2009, “President Obama announced the Homeowner
Affordability and Stability Plan
.
.
.
which spawned the Home Affordable
Modification Program (‘RAMP’) managed jointly by the Treasury Department
and the Department of Housing and Urban Development.” Thomas v. U.S. Bank
Nat. Ass’n, 474 B.R. 450, 452 (D.N.J. 2012) (internal citations omitted). RAMP
is one of four foreclosure mitigation programs instituted under the Treasury
Department’s and HUD’s Making Home Affordable program (“MHA”). Id.
Under RAMP, participating lenders will modify the terms of a loan for a
borrower that meets certain criteria, pursuant to a three-step process:
First, the servicer confirms that the mortgagee meets the threshold
income and property-related requirements. Id. at 455.
Second, the servicer calculates the modification using a “waterfall”
method “that is designed to downwardly adjust the monthly mortgage payment
to around 31 percent of the mortgagee’s income.” Id. The order of operations in
the waterfall method is to (1) capitalize accrued interest and escrow advances
(3)
to third parties; (2) reduce the annual interest rate to as low as
extend the term up to 40 years and re-amortize the loan; and (4) if necessary,
two
percent;
forbear repayment of principal until the loan is paid off and waive interest on
the deferred amount. Wigod 673 F.3d at 557 n. 1 (citing U.S. Dep’t of the
Treasury, Home Affordable Modification Program Supplemental Directive 09—0 1
(Apr. 6, 2009)).
Third, the servicer applies the “net present value (NPV) test to determine
if the modification would be more profitable to the servicer than foreclosure.”
Thomas, 474 B.R. at 455 (citation omitted). If the value of the modified
mortgage is lower than the servicer’s expected return after foreclosure, then the
servicer is not obligated to offer a loan modification. Id.; see also Wigod, 673
F.3d at 557.
A borrower will qualify for HAMP only if the interest rate on the
mortgage loan can be reduced by at least 0.125 percent without the
modified monthly mortgage payment ratio going below 31 percent.
If the servicer cannot reduce the borrower’s monthly mortgage
payment ratio to the target of 31 percent, the modification will not
4
satisfy RAMP requirements and no incentives will be payable in
connection with the modification.
Phipps v. Wells Fargo Bank, N.A., 2011 WL 302803, at *10 (E.D. Cal. Jan. 27,
2011) (quoting Making Home Affordable Program, Handbook for Servicers of
Non—GSE Mortgages Version 3.0,
§ 6.3).
Once a borrower is qualified for a RAMP loan modification, the
modification process itself proceeds through two stages. Wigod, 673 F.3d at
557. After determining that a borrower is eligible under RAMP, the borrower
and servicer enter a “trial period” of three months or more. During the trial
period, the provisional loan repayment terms consist of those formulated by the
servicer using the waterfall method. Id. at 557. If the borrower meets his or her
obligations during the trial period, then the servicer may offer a loan
modification that is permanent. See Sinclair v. Citi Mortgage, Inc., 519 F. App’x
737, 738 (3d Cir. 2013); Wigod, 673 F.3d at 554.
A servicer’s participation in the Department of Treasury’s program “is
governed by a set of guidelines (referred to as ‘the RAMP Guidelines’) that apply
to those servicers who executed a Servicer Participation Agreement (‘SPA’) in
exchange for federal funds.” Thomas, 474 B.R. at 454 (citation omitted).
Sen’icers that do not comply with HAMP Guidelines “may be held in default of
their obligations under the SPA.” Id.; see also Rost v. Avelo Mortgage, LLC, 2015
U.S. Dist. LEXIS 148703, at *16 (D.N.J. 2015).
5
HI.
Facts and Procedural History’
On Citi’s motion for summary judgment, the Court is required to identify
undisputed and disputed issues of fact, and to interpret disputes in favor of the
Heymans. Unless otherwise indicated, the facts recited below are undisputed
for purposes of Fed. R. Civ. P. 56.
A. Origination of the Loan
On October 5, 2006, OFI Mortgage Bankers, Inc. (“OFF’) provided the
Heymans with a loan in the amount of $435,000.00. (DSMF ¶1; PRS ¶1). The
Deci.
loan is evidenced by a promissory note, signed by Mr. Heyman. (Farmer
¶2 & Ex. A, Interest-Only Period Fixed Rate Note (the “Note”)). The Note is
secured by a mortgage, signed by Mr. and Mrs. Heyman, with OFI as
mortgagee. (DSMF ¶2; DE 104-4 (Nov. 29, 2017 Deposition of Abraham
Heyman, 70:14-25, 71:1-3, 73:8-20 (“Mr. Heyman Dep.”fl). The mortgage
e
encumbers a property and two-family dwelling located on Pennington Avenu
Mr.
in Passaic County (the “Pennington Avenue Property”). (DSMF ¶2; PRS ¶2;
and
Heyman Dep. 73:14-16, 19:13-14). The Note bears a 6.75% interest rate,
day of
requires monthly payments of principal, interest, and escrow on the first
each month, beginning on December 1, 2006. (Farmer DecI. ¶2 & Note (Ex. A)).
Certain key items from the record will be abbreviated as follows:
DE
—
Docket entry number;
=
Second Amended Complaint (DE 39);
Farmer Decl. = Declaration of Pamela Farmer (with Exhibits), dated Oct. 26,
2018 (DE 104-3);
DSJBr = Defendant Citi’s Summary Judgment Brief (DE 104-2);
SAC
=
Defendant Citi’s Statement of Undisputed Material Facts (DE 104-fl;
PSJBr = Plaintiffs’ Brief in Opposition to Summary Judgment (DE 110);
PRS = Plaintiffs’ Response to Citi’s Statement of Material Facts (DE 110-U;
DSMF
=
DSJRBr
DRREr
=
Citi’s Reply Brief on Summary Judgment motion (DE 121);
Citi’s Brief in Support of Motion for Rent Receiver (DE 103-fl;
=
Plaintiffs’ Brief in Opposition to Motion for Rent Receiver (DE 115);
DRR Reply = Citi’s Reply Brief in Support of Motion for Rent Receiver (DE 120).
PRRBr
=
6
Citi has introduced an Assignment of Mortgage dated October 5, 2006,
reflecting that the Heymans’ mortgage was assigned from GFI to Ciii. (DSMF
¶3; Farmer Deci. Ex. C (“Assignment of Mortgage”)). The Assignment of
Mortgage specifically identifies the Pennington Avenue Property and the
mortgage “made by Abraham Heyman and Geula Heyman” on October 5, 2006
to GFI. (Farmer Decl. Ex. C). The Assignment of Mortgage was recorded with
the Passaic County Clerk’s Office on November 16, 2006. (Farmer Deci. Ex. B).
The Heymans assert that “this assignment appears to be fraudulent. No
signature can be discerned on the note allonge.” (PRS ¶3 (citing Note)).
However, the Note allonge and the Assignment of Mortgage both contain a
signature over the typed name of Abraham Eisner, the Vice President of GFI.
(See Farmer Decl. Ex. C; Note).2 The Heymans do not point to any other indicia
of “fraud.” Accordingly, Citi’s properly supported factual assertion that the
mortgage was assigned from GFI to Citi is deemed undisputed. See Fed. R. Civ.
p. 56 (e)(2).
On April 4, 2014 (after most of the events in suit), Citi assigned the
mortgage to “US Bank National Association as Trustee.” (DSMF ¶4; Farmer
Decl. Ex. D). Like the previous assignment, this assignment names the
Heymans as the mortgagors and identifies the encumbered Pennington Avenue
A party, and afothori that party’s counsel, cannot create an issue of fact by
simply declaring themselves unsatisfied with the other side’s proofs. Mr. Eisner’s
signatures on the Note and Assignment of Mortgage appear similar; apparently that is
how he signs his name. (See DE 104-3, Ex. C; Note). Nothing on the face of these
business records suggests fraud, and plaintiff has produced no evidence (e.g., a
deposition of Eisner) in support of counsel’s equivocal assertion that the documents
*4 n.2
“appear to be” fraudulent. See Assadourian v. Harb, 2010 WL 2560495, at
(D.N.J. June 21, 2010) (“[Ajrgument by counsel unsupported by any evidence in the
•oefufly fails to satisfy Plaintiffs obligation under Local Rule 56.1.”); see
record
*35 nil (D.N.J. Dec. 19,
also Walters v. Carson, 2013 U.S. Dist. LEXIS 178249, at
2013). As noted “time and again, evidence not attorney argument creates genuine
issues of material fact.” Ecolab, Inc. z’. Arnerikem Labs, Inc., 98 F. Supp. 2d 569, 584
(D.N.J. 2000); see also Fed R. Civ. P. 56(c), (e) (providing that, in opposing summary
judgment, nonmoving party cannot rest upon mere allegations but must present
actual evidence that creates a genuine issue of material fact).
2
--
7
--
Property. (Farmer Deci. Ex. D).
In response to this factual allegation, the
Heymans assert that “Citi could not assign the note that it did not own.” (PRS
¶4). This opaque assertion does not contain a citation to the record and thus
does not create a disputed issue of fact. (See PRS ¶4; Fed. R. Civ. P. 56(e)(2)).
To the extent it may incorporate the earlier allegation that the OFI/Citi
assignment was “fraudulent,” it fails for the same reason. (Seep. 7 & n.2,
supra.)
B. Loan Default and Short Sale Proposal
In 2011, the Heymans defaulted on their loan when they failed to make
monthly payments. (DSMF ¶5; PRS ¶5). After defaulting, Mr. Heyman
contacted Citi to request review of an application for a short sale of the
property,4 as part of a plan to “walk away” and obtain a bigger home for his
growing family. (DSMF ¶6; PRS ¶6).
The Heymans’ papers repeatedly state that Citi “released” the mortgage,
implying that for some reason it just relinquished its rights. There is e-idently a
document recorded in the Passaic County Clerk’s Office on April 28, 2014, under the
title “release of mortgage.” That document, however, is simply a copy of the HAMP loan
modification agreement that was executed in 2013. (See DE 83, at 7; Passaic County
Clerk’s Office, Public Record Electronic Search System, available at
http://records.passaiccountynj.org/press/ Clerk/ClerkHome.aspx?op=basic.
A title search of filings in the Passaic County Clerk’s Office establishes that the
Mortgage was assigned from GFI to Citi, and then (after the major events in suit) to
U.S. Bank Naflonai Association as Trustee. The Heymans’ argument that Citi could
not enter into the modification agreement because it had “voluntarily released” the
mortgage is without foundation. See Section IV.C., infra.
“A ‘short sale’ in real estate occurs when the outstanding loans against a
property are greater than what the property’ is worth and the lender agrees to accept
less than it is owed to permit a sale of the property that secures its note.” Laughlin u.
BanlcofAm., N.A., 2014 WL26O2260at*1 n.4 (D.N.J. June 11,2014).
5
And why were you seeking to enter a short sale?
Q
3
.
.
.
A Because I needed a bigger house because I have now four kids, and I
needed a bigger place.
Q So you needed a bigger house, but you couldn’t make the payments, you
said, under this mortgage. Correct?
A Correct.
e
Q So you were seeking a short sale because you just wanted to move?becaus
were you looking for a bigger house or because the loan was in default
8
By letter dated October 15, 2012, Citi approved the request for a short
sale with the following terms: The closing was to occur on or before November
26, 2012; the sale price would be $235,000; the closing costs would not exceed
$25,643; and the Heymans and the purchaser would make a cash contribution
of $5,000. (DSMF ¶7; Farmer DecI. ¶6 & Lx. E).6 Under these terms, the
Heymans’ loan, which had a past due amount of approximately $62,000 and
an outstanding balance of $400,000, would be deemed satisfied. (Mr. Heyman
Dep. 98:4-10; Lx. SJ-D, DL 110-3 at 108). The Heymans rejected Citi’s short
sale terms because they objected to making the $5,000 contribution.
C. HAMP Modification
1.
April 30, 2013 telephone call
Instead, the Heymans requested to be reviewed for a loan modification
under RAMP. (DSMF ¶8; PRS ¶8). During this process, the Heymans assert, a
“representative” of Citi “informed” Mr. Heyman “that he would receive a 2%
interest rate and 3.75% lifetime” under the terms of the modified loan. (PSJBr
at 8, 11). In what appears to be Citi’s call log for Mr. Heyman, the entry dated
April 30, 2013 contains the following notation:
bnv call in to get info on approval. States got info approved for
HAM. Wanted details. lnfomred approved and setup ton tpp
A It’s a
--
the whole entire picture.
Q So short
sale just represented an option to just sort of walk away from the
property?
A Correct.
(Mr. Heyman Dep. 59:8-60:3)
In response to this factual assertion by Citi, the Heymans state as follows:
“admitted, specifically that the plaintiffs had to ‘contribute’ S 10,000 (which Cid then
adjusted to $5,000) to Citi in order to complete the short sale. Although Citi was
supposed to offer an incentive under HAFA for the short sale, instead it offered a
disincentive. See plaintiffs’ brief.” (PRS ¶7). Plaintiffs’ brief states that “Defendant [Citil
t
admits they demanded a monetary contribution from the Reymans in order to conduc
0 contribution to conduct a short sale.”
a short sale, [Citi] originally requested $10,00
(PSJBr at 7). The Heymans’ failure, again, to cite to the record, permits the Court to
deem this fact undisputed. See Fed. R. Civ. P. 56(a)(2). Moreover, Mr. Reyman testified
that it was his realtor, not Citi, who told him that he was required to make a S 10,000
contribution. (Mr. Heyman Dep. 86:14-25).
6
9
beginning in june until august. Informed tpp amt $3438.76. p&I
2057.76 escrow 1382.56. infomred apr down to 2% and lifetime
rate of 3.37% based on uw notes. infomred wil recieve tpp ltr
inmail and after tpp’s will recieve final mod docs to review,
sign/date and return. bnv ack. no other questions.
(DE 110-3 at 81, Pills’ Ex. C [punctuation and spelling sic in original]; Mr.
Heyman Dep. at 146:8-149:4). The Heymans argue that Citi orally offered a
2% interest rate, which induced them to make the TPP payments and to enter
into a loan modification agreement. (PSJBr at 8; 11, 16-19; DE 110-3, at 73,
Pltfs.’s Ex. C).°
2.
The May 3, 2013 Trial Period Plan (“TPP”) Letter
Citi reviewed the Heymans’ financial information, and by letter dated
May 3, 2013, approved the Heymans for a Trial Period Plan (“TPP”) under the
MHA. (DSMF ¶9; PRS ¶9; Farmer Decl. Ex, 0 (the “TPP Letter”)). The TPP Letter
is a four-page document, consisting of a one-page letter, two pages of
Frequently Asked Questions, and a page entitled “Important Program Info
(Additional Trial Period Plan Information and Legal Notices).”
The TPP Letter advises the Heymans that, in order to qualify for a
permanent loan modification, they must make three trial payments in the
amount of $3,438.76 by the first of each month during the trial period (June,
July, and August of 2013). (TPP Letter; DSMF ¶10; PRS
¶ 10).
Page one of the TPP Letter clearly and repeatedly states that each of the
three monthly trial payments for June, July, and August 2013, listed
Principal & interest of $2057.76 plus an escrow payment of $1382.56 would
actually total $3440.32, a figure within two dollars of the estimated monthly payment
of $3438.76.
8
Mr. Heyman testified that he was promised a 2% interest rate on the phone by a
Citi representative in or before May 2013 but could not identify the person to whom he
spoke. (Mr. Heyman Dep. at 146:8-149:4). The only documentary evidence in the
record to support Mr. Heyman’s claim is the April 30, 2013 call log.
9
The log indicates that an individual named “Jorge Lopez” inputted this
comment. (DE 110-3, at 81, Pltfs.’s Ex. C; see also DE 110-3, at 64, 174, Pltfs’ Ex. C,
E). There is no deposition testimony or declaration from Mr. Lopez clarifying or
explaining the notation.
7
10
separately, shall be in the amount of S3438.76.’° Enclosed with the TPP Letter
are “payment coupons” for the three TPP trial payments. These coupons, too,
reflect that the amount of the trial payments would be $3438.76, and specify
that the enclosed payment is for the “Trial Amount Due.” (TPP Letter).”
The Frequently Asked Questions attachment, however, contains a
passage that is grammatically, mathematically, and substantively confusing:
Q.
How was my new payment in the trial period determined?
Your trial payment is approximately 31% of your total gross
monthly income, which we determined to be $2,005.00 based
upon the income documentation you provided.
Under the HAMP regulations, that payment would set at a maximum of 3l% of
gross monthly income. Attached to Citi’s papers is a printout of a Servicer Case
Resolution form that Citi submitted to the HAMP Solution Center some months later,
on January 3, 2014. (Pamela Decl., 8 & Ex. F). This form states that the Heyman’s
gross monthly income was $11,090.17. By my calculation 31°/b of that figure equals
$3437.95. The actual trial payment amount was S3438.76, which is 31% of
$11,092.77. The figures, then, do not precisely match but are within a few cents of
each other.
1
Each coupon looks like an ordinary by-mail remittance slip, providing for
payment by enclosed check:
10
•
Account
Return
this temporary coupàn with payment.
Numbsr:
Due Date:
II[tIIIthII[i
U
Total Trial Amount Due:
7/lie
Set detaIl belov.’
$3,43e.?6
preas. jhvck bo to Indicate nohn adcren/phonc number
cha,;., and enter on reveno ,tde.
Include account ntmber on check end make payable t,:
Trialpayment $343336
CITIMORTGAGE INC.
$
Total Amount Enclosed
$
P0 Box 688950
Des Moines, IA 50368-8950
3
4
3
67
Piease do not send cash. Please atow ito IDdas (or postal delivery.
Inclut, acco,srt lnqulrle, with you psyment.
To eniwo timely pIoceuin ci your mcrtcaae payment. please use the enclosed envelope and coupon. Do not
(TPP Letter).
11
6
(TPP Letter). That figure of $2,005.00 does not seem to correspond to anything
else in the record. The pronoun “which,” moreover, could refer to either “your
gross monthly income” or “3 1% of your gross monthly income.”
The FAQ section clarifies that the Heymans would not be charged “any
fees for this trial period plan or a permanent modification.” (TPP Letter, at 2).
The letter represents that, if the loan is permanently modified, Citi will “waive
all unpaid late charges.” (Id.).
The TPP Letter cites an “escrow shortage” of $7,941.94, which would
affect the amount available to pay property taxes and insurance premiums.
(Id.). The escrow shortage could be paid as a lump sum when the loan was
modified, or in the amount of$ 132.37 per month over the course of 60 months.
(Id.).
The TPP Letter calculates only the amount of the trial payments; it does
not set forth the terms of the permanent modification that would occur if the
Heymans successfully completed the TPP. In particular, the TPP letter does not
specify any interest rate, monthly principal, or escrow payments for the
permanent modification. (TPP Letter; DSMF ¶11; PRS ¶11). However, the TPP
Letter does provide an estimated interest rate: “If we were able to permanently
modify your loan today, we estimate your modified interest rate would be
5.000%.” (TPP Letter, at 2). Mr. Heyman read the TPP Letter and understood
that this was an estimated rate. (Mr. Heyman Dep. 113:24-114:12).
With respect to any permanent modification that might ensue, the TPP
will be
Letter further provided that the “interest rate and monthly principal
.
.
.
fixed for the life of your mortgage unless your initial modified interest rate is
below current market interest rates.” (TPP Letter at 3). In the event that the
Heymans were given a below-market interest rate, that rate would be fixed for
five years, and then increased by l% per year until it reached a “cap.” (Id.). The
cap would equal “the market rate of interest being charged by mortgage
lenders” on the day the “modification agreement is prepared (the Freddie Mac
Primary Mortgage Market Survey rate for 30-year fixed rate conforming
12
mortgages).” (Id.). Mr. Heyman testified that Citi “promised me one thing
verbally on the phone and then sent me this trial payment plan which had
different terms.” (Mr. Heyman Dep. at 148:20-22).
The TPP specifies that the original loan documents remain in effect. It
provides, however, that the Heymans would be permitted to make the three
trial-period payments in lieu of the amounts required under the original loan
documents. (TPP Letter, at 4).
3.
The “June trial payment” dispute and the three trial
payments
There is no dispute that the Heymans made the three trial payments.
They contend, however, that Citi took advantage of an ambiguity regarding the
due dates and that, as a result, they actually made four.
The TPP letter is dated May 3, 2013. On May 16, 2013, Citi received a
check in the amount of $3,450 from Mr. Heyman, drawn on Chase Bank.’2
(DSMF ¶12; PRS ¶ 12). Mr. Heyman, it must be said, was less than ideally clear
about the purpose of the payment. The check was not submitted with the
payment coupon from the TPP Letter. Its dollar amount slightly exceeded the
trial payment amount stated in the TPP Letter, which was $3,438.76. (DSMF
¶12; PRS ¶13).
The obligation to make regular monthly payments on the mortgage was,
of course, ongoing. Although payments had not been made for a long time,
3 Citi in
there was no reason in theory’ that they could not have been resumed.
effect treated the May 16, 2013 payment as a regular monthly payment, and
credited it against the outstanding balance of the loan, pursuant to the terms
of the original Note. (DSMF 914). Mr. Heyman objects; Citi, he says, was
obligated to credit this May 16 check as the first trial payment, due on June 1,
2013.
Citi received the check on May 16, 2013. The payment information indicates
that Mr. Heyman sent the check on May 9, 2013. (Farmer Decl. Ex. H).
13
The sending of the TPP Letter did not affect the Note or mortgage, which
remained in full effect during the thai period. (TPP Letter at 4).
12
13
Little is at stake. If credited as a regular May loan payment, this amount
would not be lost, but would serve to reduce the arrearage. And it is
undisputed that the Heymans made three subsequent trial payments, so any
error in crediting the May 16 payment would not have jeopardized, and in fact
did not jeopardize, their participation in the TPP. Nevertheless, the parties spill
a great deal of ink on this issue. As it happens, both sides’ supporting
arguments are of little assistance to the Court.
The Heymans claim that “[sjince the payment was made after May 15, it
could not be considered a May payment but rather a June payment according
to the tpp. Further the tpp did not require that payment coupons must be
used, further, original gfi mortgage papers or tpp did not disallow additional
payments to be made.” (PRS ¶ 13). There is no support, and thcy cite none, for
the view that a payment, because it was made after the 15’ of the month,
must be credited to the following month (even if no payment is made for the
current month, it seems). Neither the TPP Letter nor the loan documents so
provide. And in any event, the Heymans had then made no payments on the
loan since 2011. There was absolutely no danger of overpayment or double
payment.
“1st
As to the due date, the TPP letter seems clear enough. It states
payment: $3,438.76 by 6/1/13.” Id. (emphasis added). At the top of the TPP,
in bold, large,
type,
set off in a box, there is a similar message, although
without the word “by”: Vt Trial Payment Due: 6/1/13”. The Heymans assert
that their payment was made on May 16, and hence was made “by” the due
date of June 1, as required by the TPP Letter. (PRS ¶14).
Citi concedes that the payment was early enough, but carps that it was
too early. The May 16 payment, says Citi, cannot be regarded as the first trial
payment because it was received “prior to the month it [the trial payment] was
due,” i.e., June. Citi, as it must, acknowledges the “by 6/1 / 13” language in the
TPP. An attachment to the TPP Letter, “Additional Trial Period Plan Information
and Legal Notices,” states that “[t]he terms of the trial period plan below are
14
ent, provided you
effective on the day you make your first trial period paym
have paid it on or before 6/1/13.” (Id. (emphasis added)).
of the TPP:
But Citi also points to the following passage, on page 1
which it is due,
If each payment is not received by [Citi] in the month in
this offer will end and your loan will not be modified
.
” says Citi, was June,
(TPP, at 1). The “month in which [the payment was] due,
cannot be regarded as
not May. So unless the payment was received in June, it
the first, June 1 trial payment.
certain date, in
I will dispose of this (non-)issue of fact now. “By” a
s Law Dictionary
common parlance, means on or before that date. See Black’
plete work by a certain
(free online edition), “By” (Example: “A contract to com
time, means that it shall be done before that time.”),
https: / / thelawdictionaiy.org/ letter/b/page/li 0/.
of the TPP. Citi
Consider the implications of Citi’s contrary interpretation
together and conclude
seemingly expects the reader to put the cited sentences
June 1. That is a
that payment is required (1) in June, but (2) not later than
is truly what was
very roundabout way of conveying “on June 1,” if that
mean that the
r
intended. It is simply unreasonable to interpret this lette to
its arriving before June
payor, when mailing the check,’4 must bear the risk of
ing after June 1 and
1 and therefore being invalid as a trial payment, or arriv
opportunism, and I
therefore being untimely. Citi’s position here smacks of
reject it.
been credited
The May 16 check, then, could and perhaps should have
above, however, it matters
as the first trial payment. For the reasons expressed
ents to Citi in the
little. The Heymans subsequently did make three trial paym
TPP. (DSMF ¶15; PRS
amount of $3,438.76, and these were duly applied to the
lly completed the trial
¶15; Farmer Decl. ¶1 i).’ Thus the Heymans successfu
implying that
I note that the payment coupons bear a post office address,
payment would ordinarily be mailed. Seen. 11, supra.
received by C16 or
15
The parties do not clarify when the remaining payments were
the payment coupons.
whether the Heymans submitted these three payments with
14
15
period that was a prerequisite to Citi’s offering a permanent loan modification.
They received that modification, under which they made a total of one
payment. If the “third” payment were counted as a fourth payment, they could
legitimately claim credit for two subsequent payments, not one. They would
remain in default, and the arrearage would be the same.
At any rate, after Citi received the August payment, it mailed the
Heymans a blank Home Affordable Modification Agreement. (DSMF ¶16; PRS
Support
¶16; Farmer Deci. ¶12, Ex. K (Letter from Patricia A. Ruiz, Homeowner
Specialist, CitiMortgage, Inc., to Abraham Heyman (Aug. 14, 2013)); Ex. J
•16
(hereinafter “Modification Agreement”))
As of the effective date of the Modification Agreement, August 1, 2013,
the amount outstanding under the Heymans’ Note was $516,662.50.
e
(Modification Agreement § 3(A)). That balance included the principal balanc
uent
($434,690.82), accrued unpaid interest ($58,683.36), advances for delinq
real estate taxes and insurance ($22,799.93), and appraisal fees ($488.39).
The modified principal balance in the Modification Agreement had a line
for “accrued unpaid late charges,” with a listed amount of “$0.00.”
(Modification Agreement, at §3(E)). The cover letter to the Heymans enclosing
the Modification Agreement confirmed that modification of the loan would
Dccl.
include the waiver of “all prior late charges that remain unpaid.” (Farmer
“all
Ex. J). Similarly, the terms of the Modification Agreement provided that
n
unpaid late charges that remain unpaid” would be waived. (Modificatio
3). The provision of the Modification Agreement that addressed
of the
“Waived or Forgiven Late Charges,” stated that “For and in consideration
waive or
modification of the loan as described herein, Lender has agreed to
with
forgive accrued, unpaid late charges subject to the Borrower’s compliance
Agreement
§
ing:
I note that Cifi’s letter enclosing the new loan documents stated the follow
that
“Be certain to make any remaining trial period payments on or before the dates
amounts
they are due. If the trial period payments are made after their due dates or in
modified.” (Pamela Deci. Ex.
different from the amount required, your loan may not be
J).
16
16
the terms of this Agreement. The total amount of accrued, unpaid late charges
waived or forgiven is U.S. $0.00.,, (Modification Agreement §3(B)).
As a result of the Modification Agreement, the Heymans’ new, modified
principal balance was $341,350.80. (Modification Agreement, at §3(E)). That
n.
represented a principal reduction of $175,311.70. Late charges were forgive
The Modification Agreement provided for a 5.25% interest rate, .25% higher
than the estimate in the TPP. (Modification Agreement, at § 3(F)(3)). That
.
modified rate represented a reduction of 1.5% from the original rate of 6.75%
The Heymans’ new monthly payment was $3,446.56.’ (Id.). Of that total,
escrow.
$2,120.82 represented principal and interest, and $1,325.82 was for
(Id.). The Heymans executed and returned the Modification Agreement on
t 1,
August 22, 2013, and the loan was modified with an effective date of Augus
2013. (DSMF ¶17; PRS ¶17). The Modification Agreement “supersede[dJ the
plan,”
terms of any [priorj modification, forbearance, trial plan or other workout
if any. (Modification Agreement, at §4(B)).18
The net monthly saving is not calculated in the parties’ papers. It is unclear, for
example, what the monthly billed amount was immediately preceding the TPP and
ly
Modification Agreement. Attached to the plaintiff’s papers, however, is a month
billing statement dated September 18, 2012, which showed a monthly “current
late
payment due” of $3818.26. (It also showed delinquency expenses of $380.39, a
SJ-D, DE 110-3 at 108).
charge of $1956, and a past due amount of $62,649.69). (Ex.
13
The Heymans throw in two purported challenges to the validity of the loan
agreement
modification agreement. (They do not explain why, if the loan modification
is invalidated, they as defaulting mortgagors are placed in any better position.)
r
First, plaintiffs claim they signed the loan modification “under duress.” (PSJB
a Ruiz
at 11; DE 110-3, at 82, Pltfs Ex. C (Email from Abraham Heyman to Patrici
sure
(Aug. 22, 2013 12:19 PM) (“I signed it under ‘duress’ as I have to avoid and foreclo
Jersey law, “the party alleging
as we have exhausted other options.”)). Under New
ul
economic duress must show that [it] has been the victim of a wrongful or unlawf act
or threat, and [s]uch act or threat must be one which deprives the victim of [itsj
176, cert.
unfettered will.” Cont7 Ban/c of Pa. ii. Barclay Riding Acad., Inc., 93 N.J. 153,
(1983). “Merely taking
denied, 464 U.S. 994, 104 S. Ct. 488, 78 L. Ed. 2d 684
a
advantage of another’s financial difficulty is not duress.” Id. at 177. Where, as here,
does
party is in default of a mortgage, the economic pressure of possible foreclosure
invalidate a contract to modify the
not constitute the sort of “duress” that would
mortgage (in the mortgagor’s favor).
Second, citing to the Pooling and Service Agreement (“PSA”) between Citi and
d”
the U.S. Bank National Association, the Heymans contend that Citi was “not allowe
17
Following the Modification Agreement, the Heymans made just one
additional payment on the loan, in September of 2013. (They filed for
bankruptcy on October 9, 2013. See infra.) Since then, the Heymans have
made no other payments. (DSMF ¶18; DE 104-4, Ex. D (Apr. 23, 2018
Deposition of Abraham Heyman, Vol. 11, 292:18-22 (hereinafter “Mr. Heyman
Dep. II’9)).’°
D. The Heymans’ Complaints to the CFPB and 0CC
After returning the executed Modified Agreement to Citi, Mr. Heyman
submitted complaints to the Consumer Financial Protection Bureau (“CFPB”)
on August 29, 2013, and to the Office of the Comptroller of the Currency
(“0CC”) on August 30, 2013. (DSMF ¶19; PRS ¶19; Farmer Deci. Ex. L, Ex. M.).
Mr. Heyman raised the following issues to the CFPB and 0CC regarding the
loan modification: (1) he believed that he was entitled to a 2% interest rate,
to “offer a HAMP complaint modification to the plaintiffs.” (PRS ¶11 (citing DE 103-2,
Ex. F, at 81 (hereinafter “PSA”fl; PSJBr at 7). The Reymans cite to the section of the
PSA entitled “assumption and modification agreements.” (Id.). That provision, however,
applies if a mortgagor, like the Heymans, transfers the mortgaged property to a nonsignatory of the loan. (PSA, at 81, Section 3.17). In the event of such a transfer, and if
the mortgage does not contain a “due-on-sale” clause, then the PSA permits Citi to
enter into an assumption and modification agreement with the original mortgagor and
the transferee, provided that “no principal, interest or other payment on the mortgage
loan is reduced or postponed.” (Id.). The provision is plainly inapplicable to a
mortgagor who seeks a loan modification under HAMP.
Despite Mr. Heyman’s clear admission during the second day of his deposition
that the loan has been in default since 2013, the Heymans respond to this factual
assertion as follows: ‘The plaintiffs admit they made one additional payment in order
to remain current and attempt to appeal the non hamp compliant modification, but
since neither Citi nor US Trust can prove they own the note, it is difficult to say
whether the plaintiffs are in default.” (PRS ¶jl8).
The fact of default is deemed undisputed (“difficult to say” does not constitute
contrary evidence). Except for the May and September 2013 payments and the three
trial payments, the Heymans have made no payments on the loan since 2011. Setting
aside the legal effect, if any, of their proffered reasons for nonpayment, they fail to cite
to the record to establish (1) that they failed to make additional payments because
they were attempting to appeal their modification; (2) the modification violated RAMP;
and (3) “neither Citi nor US Trust can prove they own the note.” The Assignment of
Mortgages, discussed above, establishes that the mortgage was transferred to Citi from
OFT in 2006, and that Citi assigned it to U.S. Bank National Association as Trustee in
2014.
18
instead of the 5.25% interest rate he received; (2) the May 16, 2013 payment
should have been applied to the TPP; (3) Mr. Heyman received an “escrow
paper,” stating that the payment will increase to $365.69; (4) that although the
loan modification papers stated that no “fees” would be assessed against the
Heymans, he was charged an $488.39 appraisal fee; (5) his late fees were not
waived; and (6) his principal balance should be reduced to $235,000, the short
sale price previously offered. (Farmer Deci. Ex. L).
Citi investigated Mr. Heyman’s allegations and responded to them by
letter dated October 25, 2013. (DSMF ¶20; PRS ¶20; Farmer Decl. Ex. M). Citi
responded to Mr. Heyman’s six objections as follows:
First, under RAMP, the target loan payments are 31% of a mortgagor’s
gross income; not everyone qualifies for a 2% interest rate, which is the
minimum; and the TPP letter itself had disclosed an estimated interest rate of
5.000%. (Pamela Decl. Ex. M, at 1). Based on Citi’s review of all the Heymans’
financial information, they qualified for a 5.25% interest rate. (Id.).
Second, the May 16, 2013 payment was credited towards the loan
balance because it was received prior to the due date under the TPP. (Id.).
Essentially, Citi asserted that it received the payment too early for the TPP.
(Id.).
Third, the escrow notice sent to Mr. Heyman was sent before the loan
modification was finalized, and therefore was not based on the updated
modification terms. Accordingly, Citi later provided Mr. Heyman with an
updated escrow analysis. (Id.).
Fourth, the Modification Agreement included a “Delinquency Expense
Balance,” which included appraisal fees; however, secured fees in the amount
of $457.56 were waived. (Id. at 2).
Fifth, as for late fees, Citi’s letter response stated that “Late fees incurred
prior to the TPP or after the modification was finalized will not be waived,” but
that late fees incurred during the TPP were waived. (Id.). As noted above,
unpaid late charges were listed as “$0.00” in the Modification Agreement.
19
(Pamela Deci. Ex K). The Heymans assert that the October 2013 response is an
admission that late fees were not actually waived in the modified loan. (PSJBr
at 12). Citi’s summary judgment motion asserts that “no late fees were
capitalized into the modified loan balance” (DSMP ¶21), and there is no
evidence that they were.2°
Six, regarding the short sale, Citi responded that the amount approved
for the prior short sale proposal (which the Heymans rejected) is not considered
when determining a loan modification; the two programs are entirely different.
(Id.).
E. The Heymans’ Bankruptcy
On October 9, 2013, the Heymans filed under Chapter 7 in the United
States Bankruptcy Court, District of New Jersey. (DSMF 22; PRS ¶22; In re
Heyman, No. 13-32151-NLW (Bankr. D.N.J. Oct. 9, 2013)). In their bankruptcy
petition, the Heymans, contradicting their position here, listed Citi as a secured
creditor and stated their intention to reaffirm the loan. (DSMF ¶23; PRS ¶23;
DE 104-4, at 117, 134).
Citi provided a reaffirmation agreement, outlining the unpaid principal,
interest, fees, and costs due as of October 25, 2013. (DSMF ¶24; DE 104-4, Ex.
G at 137-45). The interest rate was specified as 5.25%. (Id.). Citi listed the total
The Heymans respond to Citi’s factual assertion as follows:
The very October 25th 2013 letter states ‘no prior late fees will be waived’
whilst the Hamp tpp promises that “prior late fees will be waived’ as does
introduction letter to the permanent RAMP and plaintiffs exhibits
attached shows statement with approximate late fees prior to the Hamp.
Furthermore the permanent HAMP shows $0 fees waived. The fees had to
be capitalized as it was not waived as promised and cmi Admits it in the
letter see also Ex SJ-D approx prior lates assessed. Citi’s bare assertion
as to how these fees were treated is not a substitute for the accounting
that the plaintiffs requested and Citi never furnished.
(PRS ¶2 1). “Ex SJ-D” appears to be a monthly statement issued to Mr. Heyman from
September 18, 2012, which reflects that the Heymans owed $1,956 in late charges.
(DE 110-3, at 108, Pltf.’s Ex. SJ-D). This regular monthly billing statement, dating
from months before the TPP or loan modification, says nothing at all about whether
the late charges were waived in the loan modification. Plaintiffs do not cite to anything
in the record where they requested an “accounting.”
20
20
amount to be reaffirmed as $518,181.33. (Id.). Within the bankruptcy
proceeding the Heymans attempted to negotiate the reaffirmation agreement,
by reducing the amount due on the loan to $341,000 and reducing the interest
rate to 2%. (DSMF ¶24).21
Citi did not agree to the Heymans’ proposed revised terms; the
Bankruptcy Court did not approve the reaffirmation agreement; and the trustee
abandoned the property. (DSMF ¶25; DE 104-4, Ex. G at 140; In re Heyman,
No. 13-32151-NLW (Bankr. D.N.J. Oct. 9, 2013) (DE 24); PSJBr at 12). No
objection was filed to the notice of abandonment. In reHeyman, No. 13-32151NLW (Bankr. D.N.J. Oct. 9, 2013) (DE 28). The Heymans received a discharge
151in bankruptcy on January 14, 2014. (DSMF ¶25; In reHeyman, No. 13-32
NLW (Bankr. D.N.J. Oct. 9, 2013) (DE 27)).22
In July of 2014, the Heymans moved out of the mortgaged Pennington
Avenue Property and took up residence in Lakewood, New Jersey. (DSMF ¶26;
PRS ¶26). The Heymans have used the Pennington Avenue Property as a rental,
income-generating property. Aside from the short-lived TPP/ RAMP period in
In response to this factual allegation, the Heymans assert, without citation to
ation of
the record, “Plaintiffs admit prior counsel attempted to negotiate the reaffirm
ed 2% rate and reported secured
the loan via the agreement sent by CMI, to the promis
modified balance of $341,000. CMI failed to appear or oppose and the property was
abandoned by the trustee.” (PRS ¶24). Citi’s factual assertion in paragraph 24 of its
Statement of Material Facts is deemed admitted because the Heymans fail to support
their denials with a citation to the record. Fed. R. Civ. P. 56(e). In particular, the
Heymans do not cite to anything in the record to establish that Citi’s failed to appear
or that this was the basis for the trustee’s abandonment. See In re Heyman, No. 1332151-NLW (Bankr. D.N.J. Oct. 9, 2013).
Despite asserting that the property was abandoned by the bankruptcy trustee
in their summary judgment brief, the Heymans assert that the mortgage should be
treated as a discharged debt in their opposition to the rent receiver motion. (PRRBr at
5-6).
22
Rather than addressing the factual allegations in these paragraphs, the
had the
Heymans make a non-responsive legal argument. (PRS ¶25 (“The bankruptcy
legal effect of a permanent injunction pursuant to 11 U.s.c §502, 11 U.S.C §524, 11
U.S.C. § 506 (a), which disallows ‘in rem’ and ‘in personam’ claims among others,
assessment of pre petition debts, or amounts above the secured collateral, and
disallows threats of repossession or harassment of the discharged debtor’); see
Section. l.A. n.2, supra.
21
21
2013, they have made no payments on the mortgage loan since 2011. (DSMF
¶27)
23
F. Additional Facts Raised in Rent Receiver Motion
The original mortgage from OFI includes a “1-4 Family Rider,” which
contains a provision for the assignment of rents from borrowers. (DL 103-2, at
33-34, Lx. B). That provision provides as follows:
H. ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER;
LENDER IN POSSESSION. Borrower absolutely and
unconditionally assigns and transfers to Lender all the rents and
revenues (“Rents”) of the Property, regardless of to whom the Rents
of the Property are payable. Borrower authorizes Lender or
Lender’s agents to collect the Rents, and agrees that each tenant of
the Property shall pay the Rents to Lender or Lender’s agents.
However, Borrower shall receive the Rents until (i) Lender has
given Borrower notice of default pursuant to paragraph 21 of the
Security Instrument and (ii) Lender has given [] notice to the
tenant(s) that the Rents are to be paid to Lender or Lender’s agent.
This assignment of Rents constitutes an absolute assignment and
not an assignment for additional security only.
If Lender gives notice of breach to Borrower: (i) all Rents received
by Borrower shall be held by Borrower as trustee for the benefit of
Lender only, to be applied to the sums secured by the Security
Instrument; (ii) Lender shall be entitled to collect and receive all of
the Rents of the Property; (iii) Borrower agrees that each tenant of
the Property shall pay all Rents due and unpaid to Lender or
Lender’s agents upon Lender’s written demand to the tenant; (iv)
Plaintiffs’ responsive statement of facts admits that they have been using the
property as a rental property, and further alleges the following:
[T]he plaintiffs are not free to just pay any amount they want and Citi
has offered only loan amounts that exceed the rental income by further
offering a HAMP which is not available for the loan. Further, neither CMI
nor ‘US Bank’ has any cognizable legal ownership of the property or OFI
mortgage bankers Inc note as it “released” the mortgage lien from county
records in April 28, 2014 see D.E 83 exhibits, nor does the OF! mortgage
bankers Inc note show cmi’s endorsement or that of US Bank trustee for
cmalt remic as required by the Pooling and senicing agreement, And as a
“negotiable instrument” under the New Jersey uniform commercial code
“ucc.” Thus neither CMI or US Bank” would be entitled to the rental
income or property or make a claim for such.
23
(PRS ¶27).
22
unless applicable law provides otherwise, all Rents collected by
Lender or Lender’s agents shall be applied first to the costs of
taking control of and managing the Property and collecting the
Rents, including but not limited to, attorneys’ fees, receiver’s fees,
premiums on receiver’s bonds, repair and maintenance costs,
insurance premiums, taxes, assessments and other charges on the
Property, and then to the sums secured by the Security
Instrument; (v) Lender, Lender’s agents or any judicially appointed
receiver shall be liable to account for only those rents actually
received; and (vi) Lender shall be entitled to have a receiver
appointed to take possession of and manage the Property and
collect the Rents and profits derived from the Property without any
showing as to the inadequacy of the Property as security.
(DE 103-2, at 33, Ex. B). An assignment of rents “shall terminate when all the
sums secured by the Security Instrument are paid in full.” (Id.). Both Mr. and
Mrs. Heyman signed this Rider. (DE 103-2, at 34).
The Rider was part of the original mortgage documents. The Heymans’
Modification Agreement specifically incorporates those earlier terms:
That all terms and provisions of the Loan Documents, except as
expressly modified by this Agreement, remain in full force and
effect; nothing in this Agreement shall be understood or construed
to be a satisfaction or release in whole or in part of the obligations
contained in the Loan Documents; and that except as otherwise
specifically provided in, and as expressly modified by, this
Agreement, the Lender and I will be bound by, and will comply
with, all of the terms and conditions of the Loan Documents.
(Modification Agreement,
§ 4(F)).24 Citi issued a notice of default on April 14,
2014. (DE 103-2, Ex. J, at 92).
Mr. Heyman could not remember the names of prior tenants or the rents
they paid.25 The current status is as follows. In October 2016, the Heymans
The Modification Agreement “amend[sJ and supplement[sl (1) the Mortgage on
the Property, and (2) the Note secured by the Mortgage. The Mortgage and Note
together, as they may previously have been amended, are referred to as the ‘Loan
Documents.” (DE 104-3, at 79).
25
The Heymans rented both units to others prior to the current tenants but Mr.
Heyman could not specifically identify them during his deposition. (DE 103-3, Ex. A,
at 17:2-19, 18:7-23, 2 1:6-17). Mr. Heyman indicated that he had never lived in the
24
23
began renting one of the family units to a “Ms. Silverberg” for $1,475 per
month. (DE 103-3, Ex. A, at 19:20-20:6). The Heymans began renting the other
family unit to an individual named Yosef Mandelbaum, beginning in or about
August 2015, for $1,400 per month. (DE 103-3, Ex. A, at 12:2-12, 16:8-14,
22:9-15). Both units remain occupied. Mr. Heyman testified that he has
destroyed copies of the leases, has not kept copies of the checks, and has
deposited the rental checks into his personal bank account. (IDE 103-3, Ex. A,
at 15:24-17:1). Citi has paid the property taxes since the Heymans defaulted in
2013. (DE 103-3, Ex. B, at 291:16-293:25).
On February 21, 2018, Citi issued a second notice of default. (DE 103-2,
Ex. K, at 95). Also on February 21, 2018, Citi, through its counsel, requested
that the Heymans (1) produce copies of all leases for any tenants currently in
the mortgaged property; (2) confirm whether the Heymans would consent to the
appointment of a rent receiver; (3) provide an accounting of all rental income
since September of 2013; and (4) indicate whether the Heymans would escrow
any rental income pending a decision on the rent receiver motion. (DE 103-3,
at 24-25, Ex. C).
On March 12, 2018, the Heymans’ counsel indicated that the Heymans
would not consent to a rent receiver and have not provided copies of the
subject leases or any further information regarding the tenants or an
accounting. (DE 103-3, Vellutato Dec., at
¶ 5). Citi claims that this has
impeded its ability to provide the tenants notice as required under the Rider.
G. Procedural History
The Heymans, represented by prior counsel, filed their initial complaint
on March 14, 2014. (DE 1). After motion practice and multiple dismissals, the
Court accepted the Heymans’ Second Amended Complaint, which was filed on
September 26, 2016. (DE 39).
downstairs unit and had used it as a rental from 2002 to 2011. (DE 103-3, Ex. A at
24:12-25).
24
Following discoven’, Citi flied this motion for the appointment of a rent
receiver and a motion for summary judgment on October 26, 2018. (DE 103,
104). Citi’s motion for summary judgment seeks dismissal of the SAC in its
entirety. Citi’s rent receiver motion seeks to assign all rental income generated
from the mortgaged property to Citi, or, alternatively, to appoint a rent receiver
to collect rents, make the necessary tax payments for the mortgaged property,
and to hold any excess monies in trust for the protection of the mortgagee’s
interest in the Property. (DRRBr at 8-9).
On November 15, 2018, the Heymans, without seeking leave, belatedly
filed a motion to strike Citi’s answer for purported discovery violations. (DE
102, 107). The motion was filed almost twenty days after the Court-ordered
deadlines for such motions. (DE 102). The Court nonetheless accepted the
Heymans’ filing. (DE 109).
On November 27, 2018, the Heymans filed their opposition to Citi’s
motion for summary judgment. (DE 110). The opposition was, again, untimely
and filed without leave. (DE 102, 112). However, the Court accepted the
untimely opposition. (DE 114).
On Defendant 11, 2018, the Heymans filed their opposition to Citi’s rent
receiver motion, which was, yet again, untimely and filed without leave. (DE
115, 116). The Court accepted the Heymans’ filing. (DE 118).
On January 2, 2019, Citi filed its reply for its summary judgment and
rent receiver motions. (DE 120-122).
On March 6, 2019, the Court denied the Heymans’ motion to strike Citi’s
answer. (IDE 123-124).
25
IV.
Summary Judgment Motion
The Heymans essentially allege that Cid “misled” them into a loan
modification under RAMP and offered a modification that “did not comply or
conform with HAMP guidelines and material promises made by [Citi.]” (PSJBr
at 1).
A. Applicable Standard
Federal Rule of Civil Procedure 56(a) provides that summary judgment
should be granted “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.”
See Kreschollek v. S. Stevedoring Co., 223 F.3d 202, 204 (3d Cir. 2000);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 5. Ct. 2505, 91 L. Ed.
2d 202 (1986). In deciding a motion for summary’ judgment, a court must
construe all facts and inferences in the light most favorable to the nonmoving
party. See Boyle v. Cnty. of Allegheny Pennsylvania, 139 F.3d 386, 393 (3d Cir.
1998) (citing Peters v. Delaware River Port Auth. of Pa. & N.J, 16 F.3d 1346,
1349 (3d Cir. 1994)). The moving party bears the burden of establishing that
no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477 U.S.
317, 322-23, 106 5. Ct. 2548, 91 L. Ed. 2d 265 (1986). “[W]ith respect to an
the burden
issue on which the nonmoving party bears the burden of proof.
that is, pointing out to
on the moving party may be discharged by ‘showing’
.
.
—
the district court—that there is an absence of evidence to support the
nonmoving party’s case.” Celotex, 47No7 U.S. at 325.
Once the moving party has met that threshold burden, the non-moving
party “must do more than simply show that there is some metaphysical doubt
as to material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.S. 574, 586, 106 5. Ct. 1348, 89 L. Ed. 2d 538 (1986). The opposing party
must present actual evidence that creates a genuine issue as to a material fact
for trial. Anderson, 477 U.S. at 248; see also Fed. R. Civ. P. 56(c) (setting forth
types of evidence on which nonmoving party must rely to support its assertion
that genuine issues of material fact exist).
26
Unsupported allegations, subjective beliefs, or argument alone, however,
cannot forestall summary judgment. See Lujan v. Nat’l Wildlife Fed’n, 497 U.S.
871, 888, 111 L. Ed. 2d695, 110 S. Ct. 3177 (1988) (nonmovingpartymaynot
successfully oppose summary judgment motion by simply replacing
“conclusory allegations of the complaint or answer with concluson’ allegations
of an affidavit”); see also Gleason a Nonvest Mortg., Inc., 243 F.3d 130, 138
(3d Cir. 2001) (“A nonmoving party has created a genuine issue of material fact
if it has provided sufficient evidence to allow a jury to find in its favor at trial.”).
Thus, if the nonmoving party fails “to make a showing sufficient to establish
the existence of an element essential to that party’s case, and on which that
party will bear the burden of proof at trial
.
.
.
there can be ‘no genuine issue of
material fact,’ since a complete failure of proof concerning an essential element
of the nonmoving party’s case necessarily renders all other facts immaterial.”
Katz a Aetna Cas. & Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) (quoting Celotex,
477 U.S. at 322-23).
Moreover, the “mere existence of some alleged factual dispute between
the parties will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there be no genuine issue of material fact.”
Anderson, 477 U.S. at 247-48. A fact is only “material” for purposes of a
summary judgment motion if a dispute over that fact “might affect the outcome
of the suit under the governing law.” Id. at 248. A dispute about a material fact
is “genuine” if “the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Id.
B. Pamela Farmer’s Declaration
As a threshold issue, the Heymans argue that the Court should disregard
the declaration of Pamela Farmer, Citi’s Assistant Vice President, Office of Legal
Support, and attached exhibits. (PSJSr at 2-4). The Heymans raise two
principal objections: that Farmer lacks personal knowledge, and that the
exhibits are not properly admissible as business records. I find that the
declaration meets the requirements of Rule 56 and may be considered.
27
On a motion for summary judgment, “[a] party may object that the
material cited to support or dispute a fact cannot be presented in a form that
would be admissible in evidence.” Fed. 1?. Civ. P. 56(c)(2). Federal Rule of Civil
Procedure 56(c)(4) sets out three elements that a declaration in support of a
summary judgment motion must meet. It “must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that
the affiant or declarant is competent to testify on the matters stated.” As for
authentication, the proponent has an “incredibly ‘slight’ burden, which may be
satisfied by simply producing evidence sufficient to support a finding that the
item is what the proponent claims it is.” Blunt v. Lower Merion Sch. Dist, 767
F.3d 247, 330 (3d Cir. 2014) (citing Fed. R. Evid. 901(a)). “Fed. R. Evid. 901
allows authentication to be ‘satisfied by evidence sufficient to support a finding
that the matter in question is what it proponent claims,’ which may be
accomplished by the testimony of a witness with knowledge.” Cordance Corp. u.
Amazon.com, Inc., 639 F. Supp. 2d 406, 432 (D. Del. 2009).
Recent amendments to Rule 56 have moved away from requiring litigants
to meet trial-like evidentiaiy foundation requirements at the summary
judgment stage. Prior to the 2010 amendments, “Rule 56 required
documents
.
.
.
to be authenticated by and attached to an affidavit that met the
requirements of Rule 56 and the affiant had to be a person through whom the
exhibits could be admitted into evidence.” In re LTC Holdings, Inc., 2019 Bankr.
LEXIS 277, *6 n.13 (Bankr. D. Del. Feb. 4, 2019). The rule makers, however,
omitted these specific requirements with the 2010 amendments. Id.
Rule 56(c)(4)’s newly-added “would be admissible” language is in accord
with this Circuit’s requirements for summary judgment. Id.; see also FOP v.
City of Camden, 842 F.3d 231, 238 (3d Cir. 2016). At this stage, the party
proffering the declaration only need to show that the facts presented are
“capable of being admissible at trial” for them to be considered for summary
judgment. Id.; see also Kuibyshevnefteorgsynthez v. Model, 1995 U.S. Dist.
LEXIS 1896, at *3Q (D.N.J. Feb. 6, 1995) (providing that Court may “consider
28
unauthenticated documentary evidence,” on summary judgment, “if there were
reason to believe it could be authenticated later.”). In other words, when
evidence is not presented in an admissible form in the context of a motion for
summary judgment, but it may be presented in an admissible form at trial, a
court may still consider that evidence.
Personal knowledge for purposes of Federal Rule of Evidence 602 “may
consist of what the witness thinks he knows from personal perception,” and
only requires that the
witness
“who testifies to a fact
.
.
.
actually observed the
fact.” More to the point here, personal knowledge of business records may be
gained by review of such records by an appropriate person. See In re Ski, 2015
U.S. Dist. LEXIS 172126, at *21 (D.N.J. Dec. 28, 2015) (“The court did not
abuse its discretion in holding that ‘personal knowledge’ may be gained
through review of the relevant records relating to the case.”) (citing Serfess v.
Eqi4fax Credit Info. Servs., LLC, 2015 WL5123735, at*2 (D.N.J. Sept. 1,2015)
(denying motion to strike declaration of employee who attested to facts “based
on [her] personal knowledge gained through [her] employment with Equifax
and/or [her] review of Equifax’s business records”); Byrd v. Merrill Lynch, 2011
WL 2680572, at *6 (D.N.J. July 8, 2011), aff’d, 479 F. App’x 444 (3d Cir. 2012)
(permitting declaration of employee who was not personally present)); see also
*5
Cntmpler v. Midland Credit Mgmt, Jnc., 2013 U.S. Dist. LEXIS 174589, at
(E.D. Pa. Dec. 13, 2013) (declining to strike declaration where declarant
attested that he reviewed business records and noting that declarant did not
need independently obtained knowledge of attested-to business practices).
Farmer’s declaration meets the requirements of Rule 56(c)(4). As set forth
in Farmer’s declaration, her knowledge is based upon a review of Citi’s books
and records, which are kept in the regular course of business. (DE 104-3, ¶1).
Farmer’s declaration further attests that the attached exhibits are “true and
accurate” copies. (DE 104-3, ¶1J4-6, 8-9, 11-13, 15). Personal knowledge may
be based on a review of documents, as attested to by Farmer in this case. That
29
is all that is required at this stage. Accordingly, the Heymans’ request that the
Court disregard Farmer’s affidavit and accompanying exhibits is denied.2°
C. Citi’s Authority to Modify the Loan
I move on to an issue, not specific to any one claim, that runs through
many of the Heymans’ arguments. Throughout their briefing and responses to
Citi’s statement of undisputed material facts, the Heymans seem to challenge
the validity of the mortgage assignments. (See PRS
¶
3 (denying that mortgage
was assigned from GFI to Citi “because this assignment appears fraudulent.”);
PRS ¶4 (denying that Citi assigned mortgage to U.S. Bank National Association
as Trustee “because Citi could not assign the note that it did not own.”); PRS
¶18 (“since neither Citi nor US Trust can prove they own the note, it is difficult
to say whether the plaintiffs are in default.”); PSJBr at 4 (‘The very foundation
of [Citi’s] claim of ownership or servicer status is unproven”); PSJBr at 5 (“[Citi]
cannot prove standing or that it legally owns or was legally ‘delegated’ to service
the OFI note the Heymans were obligated to pay.”); PSJBr at 14-15 (alleging
that Citi committed “fraud upon the court by claiming and asserting it legally
owns or owned the Heymans’ loan.”); PSJBr at 31 (“Citi
...
recorded a fake
assignment to a US Bank Trust. Because Citi does not now and never has
legally owned the plaintiffs’ loan, these remarks are false.”); PSJBr at 32 (“Citi
knew that it had no claim on the plaintiffs’ property yet it published an
ownership interest.”)). The Heymans recast this argument as a standing issue
in their opposition to Citi’s rent receiver motion. (PRRBr at 8-10).
To all of this, there are answers both factual and legal.
Apparently only selective sticiders for the Rules of Evidence, the Heymans cite
an online article, from which they suggest that Citi must have created fraudulent
documents in their case. (PSJBr at 4 (citing Kathryn Vasel, Citi mortgage units fined
$28.8 million, CNN (Jan. 23, 2017, 5:03 PM),
https: / /money.cnn.com/20 17/01 /23/pf/ cfpb-citi-mortgage-fined/index.htmlfl. The
article relates that the CFPB fined Citi’s mortgage units for requiring excessive
paperwork from some homeowners seeking foreclosure relief. From this, the Heymans
argue that the loan documents involved in their transaction are “fraudulent.”
Evidentian’ objections aside, this article says nothing of the kind, and is insufficient to
raise a factual inference cognizable under Rule 56 and Local Rule 56.1.
26
30
First, the evidence does not create an issue of fact as to the fact or
validity of the GFI/Citi assignment. Mere say-so by attorneys, no matter how
often repeated in briefs, does not suffice to raise a factual issue on summary
judgment. The assignments are in evidence and are regular on their face.
Calling them “fraudulent” does not create a genuine, material issue of fact; to
defeat summary judgment, a party must point to a conflict in the evidence.
The facts surrounding the assignment are discussed in more detail
above. In brief, OFI, the original mortgagee in 2006, immediately and
unconditionally assigned the mortgage to Citi; Citi was the only holder of the
mortgage from 2006 until 2014.
On April 4, 2014, Citi assigned and conveyed the mortgage to U.S. Bank
National Association as the trustee of “CMALT (CitiMortgage Alternative Loan
Trust) REMIC Series 2006-A7 REMIC Pass-Through Certificates.” (DE 104-3, at
39). In essence, the loan was pooled. Pursuant to a Pooling and Servicing
Agreement (PSA) among Citicorp Mortgage Securities, Inc. as Depositor,
CitiMortgage, Inc. as Servicer and Master Servicer, and U.S. Bank National
Association as Trustee, Ciii is the servicer of the loans in CMALT. (DE 103-2, at
54-61). U.S. Bank National Association also gave Citi a limited Power of
Attorney (dated September 20, 2013) over CMALT. (DE 103-2 at 63).
In short, Citi was the exclusive holder of the mortgage until 2014, when
the loan was pooled into CMALT. Thereafter, Citi was the servicer, and as
servicer, had the right to modify the loan or to seek default.
I add that the Heymans have made mortgage payments to Citi, have dealt
extensively with Citi in connection with the RAMP matter, and have listed Citi
as a secured creditor in their bankruptcy. They have never alleged that their
payments have not been credited, that they have been double-billed by
competing putative mortgagees, or anything of the kind. They brought this
action solely against Citi.
Second, to the extent that the Heymans may intend to assert a quiet-title
claim, they cannot do so by throwing it into a brief. A plaintiff may file a quiet
title action to determine the validity of any document, obligation, or deed
31
affecting any right, title, or interest in land. Such an action may be filed to
resolve whether a putative assignee of an otherwise valid mortgage properly
holds the mortgage. See N.J. Stat. Ann. §2A:62-1; Suser v. Wachovia Mortg.,
FSB, 433 N.J. Super. 317, 324-25 (App. Div. 2013); see also Deutsche Bank Tr.
Co. Ams. v. Angeles, 428 N.J. Super. 315, 318 (App. Div. 2012) (stating that
standing to enforce obligation under mortgage is conferred by “either
possession of the note or an assignment of the mortgage”) (citation omitted).27
The SAC does not contain a quiet-title cause of action. The closest fit is
Count VII (Slander of Title), but that is not a claim that there never was an
assignment; it alleges that Citi inflated the value of its lien. Opposition to
An action to quiet title empowers “a person, who is in peaceable possession of
realty as an owrwr, a means to compel any other person, who asserts a hostile right or
claim, or who is reputed to hold such a right or claim, to come forward and either
disclaim or show his right or claim, and submit it to judicial determination.” Schiano
v. MBNA, 2013 WL 2452681, at * 26 (D.N.J. Feb. 11,2013). “[I]t is a settled rule that
in an action to quiet title the plaintiffs must rely upon the strength of their own title
and not upon the weakness of that of the defendants.” Oliver v. Banic ofAm., NA.,
2014 WL 1429605, at *2 (D.N.J. Apr. 14, 2014) (quotation and citation omitted).
27
The Heymans do not adequately allege the strength of their own title. The
Heymans do not dispute that they executed the mortgage and promissory note. The
Heymans do not dispute that they defaulted on their mortgage and therefore are
“indebted to the rightful owner of this lien.” Dudley v. Meyers, 422 F.2d 1389, 1394-95
(3d Cir. 1970); see also Jacobs v. Fannie Mae, 2013 WL 3196933, at *2 (App. Div. June
26, 2013) (“IPlaintiffi acknowledges that he obtained a loan secured by the mortgage
and note in question and does not allege that he paid off the note and extinguished
the mortgage lien.”). Based on these facts, the Heymans do not have some superior
title that would defeat that of Citi.
Additionally, “Courts in this jurisdiction have repeatedly found mortgagors do
not have standing to challenge the assignment of their mortgages because they are not
parties to or third-party beneficiaries of the assignment.” English v. Fed. Nat’l Mortg.
Ass’n, 2017 WL 1084515, at *3 (D.N.J. Mar. 21, 2027) (collecting cases). This is true
even when a mortgagor brings an action to quiet title. See Perez v. JPMorgan Chase
Bank, NA., 2016 WL 816752, at *7 (D.N.J. Feb. 29, 2016) (holding that plaintiffs quiet
title claim would “fthl[j for lack of standing” to the extent it asserted that “[djefendants
improperly assigned the Note and Mortgage.” (citations omitted)). “Merely alleging.
the loan documents are invalid or improperly assigned does not state a claim for an
*4
action to quiet title.” Andujar v. Deutsche Bank Nat. Trust Co., 2015 WL 4094637, at
(D.N.J. July 7, 2015) (citation and internal quotation marks omitted). The Heymans
have not alleged or argued that they are a party to, or third-party beneficiary of, the
assignments at issue.
32
summary judgment is not the appropriate vehicle to insert new claims. See Bey
v. Daimler Chrysler Servs. of N. Am., 2006 WL 361385, at *11 (D.N.J. Feb. 15,
cannot be raised
2006) (“[C]laims [that] were not alleged in the complaint
for the first time in opposition to a motion for summary judgment.”). Because
.
.
.
the Heymans did not plead this claim in the SAC, I vi1l not consider it on
summary judgment. Anderson a DSMN.V, 589 F. Supp. 2d 528, 534 n.5
(D.N.J. 2008) (declining to consider new breach of contract claim on summary
judgment when plaintiff failed to plead that “particular claim” in the
complaint).
The Heymans seem to dispute whether Citi was permitted, as the servicer
of the loan, to enter into a loan modification with the Heymans. (PSJBr at 2, 5).
In particular, the Heymans argue that Citi was not delegated the authority to
“collect” payments or enter into a loan modification until September 20, 2013,
when a power of attorney (“P0K’) was executed between Citi and U.S. Bank
National Association. (PSJBr at 5). That POA was signed after the Heymans
agreed to the Modification Agreement. (PSJBr at 6).
Citi, however, has demonstrated that it was not merely a servicer, but
was and is the actual holder of the mortgage by assignment from GEl from
2006 until 2014, a period that encompasses the dates of the loan modification.
(Farmer Dccl. Ex. C; DE 83, at 7). The loan modification was executed in 2013,
while Citi was the sole assignee. Citi remained the sole assignee of the
mortgage until April 4, 2014, when it reassigned the mortgage to US Bank
National Association as Trustee, but remained the servicer. (Seep. 31, supra;
DSMF ¶4; Farmer Dccl. Ex. D). The POA, which was executed after the
Modification Agreement, but before the assignment to US Bank National
Association as trustee, does not undercut Citi’s authority, as mortgagee, to
offer a modification in August of 2013. (See DE 83, at 7). The POA, whatever its
legal effect, has no bearing on Citi’s authority to enter into that agreement with
the Heymans.
D. Breach of Contract
33
Turning to the individual claims, Citi seeks summary judgment on the
Heymans’ claim of breach of contract. (DSJBr at 28-30). The SAC is not entirely
clear, but this claim seems to rest on either the April 30 telephone call (as an
oral contract) or the TPP Letter itself (as a written contract):
This cause of action includes the following elements: (1) the
existence of a binding contract (here, the promise to provide a
proper loan modification that met the terms of HAMP); (2) that the
nonbreaching party performed its contractual obligations; (here, by
fulfilling the trial payment plan obligations which defendant
required) (3) the other party failed to fulfill its contractual
obligations without legal excuse (here, by failing to offer a RAMP
type mortgage loan modification); and (4) the nonbreaching party
suffered damages as a result of the breach. Here, the plaintiffs
suffered by not being able to afford the payments and having to file
for bankruptcy.
(SAC ¶6 1).
Citi moves for summary judgment on several bases. First, Citi contends
that the TPP did not create an enforceable contract between the parties and is
barred by the statute of frauds. Second, even if the TPP did create a binding
contract, Citi argues that the Heymans cannot demonstrate breach or
damages.
The Reymans do not directly address Citi’s arguments regarding the TPP
agreement. The only argument that comes close to the issue occurs in a
footnote that principally contends that Citi does not have a “cognizable claim to
the Heymans’ loan, note, or property.” (PSJBr at 26 n.l2). That footnote also
suggests that the TPP created a binding contract, which the Heymans accepted
by tendering TPP payments. (See Id.).
The Heymans’ argument is cursory: “[T]he contract between the parties
began with the TPP for the RAMP modification. Because Citi called the loan
modification a HAMP modification, the plaintiffs had a right to expect that the
modification Citi offered would be compliant with HAMP. However, it was not.”
(PSJBr at 26-2 7). The Reymans do not specify whether their breach of contract
claim is based on the TPP or the permanent loan modification agreement,
insLead pointing to, what can be best described as, a course of dealing. The
34
Heymans do not concretely argue that Citi breached the terms of either
agreement, or identify the relevant contractual terms or nature of any such
breach.
The Heymans assert that Citi’s witness “insisted that the modification
loan complied with RAMP.” (PSJBr at 29). The implication seems to be the TPP
is the agreement that was allegedly breached.
The Heymans, however, then fail to point to any provision of RAMP that
was violated or state how the TPP was breached by that violation. (PSJBr at
32).28
They do not seem to be arguing that the permanent Modification
Agreement was breached, nor do they argue (if this is what they meant) that
the April 30, 2013 phone call with a Citi representative created a binding oral
contract. (See PSJBr at 26-29).
I think that the TPP has contractual status, but only to this extent: Citi
undertook to offer a RAMP-compliant loan modification if the Heymans
complied with the conditions of the TPP. Once that precondition occurred, Citi
would offer a loan modification, which the Heymans were free to accept or not.
(As it happened, the Heymans, represented by counsel, signed the loan
modification.) The TPP did not, however, commit Citi to any particular terms.
Despite the unclear presentation, I have attempted to extract from the briefs
and pleadings the Heymans’ claims that the modification agreement violated
Typically, “arguments raised in passing (such as, in a footnote), but not
squarely argued, are considered waived.” John Wyeth & Brother Ltd. v. Cigna Intl
Corp., 119 F.3d 1070, 1076 n.6 (3d Cir. 1997) (citing Commonwealth of Pa. v. HHS,
101 F.3d 939, 945 (3d Cir. 1996)); see also Laborers’Int’l Union ofN. Am., AFL-CIO v.
Foster Wheeler Energy Corp., 26 F.3d 375, 398 (3d Cir. 1994) (“a passing reference to
will not suffice to bring that issue before this court.”); Kadetsky a Egg
an issue
Harbor Twp. Bd. of Educ., 82 F. Supp. 2d 327, 334 n.5 (D.N.J. 2000) (finding “casual
reference” to a claim results in waiver). “When an issue is not pursued in the
argument section of the brief, the appellant has abandoned and waived that issue on
appeal.” Travitz u. Ne. Dep’t ILGVVU Health & Welfare Fund, 13 F.3d 704, 711 (3d Cir.
1994) (citations omitted); see also Olenwright v. Carbondale Nursing Home, Inc., 2017
U.S. Dist. LEXIS 41805, at *29 n.3 (M.D. Pa. Mar. 23, 2017) (“[TJhe parties have failed
to properly address this issue and rely solely on sparse arguments in footnotes. This
renders the court unable to ‘make an informed ruling’ on the issue.”).
28
...
35
the TPP agreement because it was not HAMP-compliant. (See Section D.ii,
infra.)
i. Enforceability of TPP Agreement
Citi argues that the TPP agreement was conditional in nature and simply
the “first step” in the modification process. (DSJBr at 29-30). Because the TPP
Letter did not contain any material terms of the permanent modification and
was not executed or signed by the Heymans, Citi contends that the TPP is not
enforceable. (Id.).
The Heymans’ breach of contract claim presupposes the existence of an
enforceable contract. The basic features of a contract include offer, acceptance,
consideration, and performance by both parties. Shelton v. Restaurant.com,
Inc., 214 N.J. 419, 439 (2013) (citations omitted). “It is well settled that parties
may effectively bind themselves by an informal memorandum where they agree
upon the essential terms of the contract and intend to be bound by the
memorandum, even though they contemplate the execution of a more formal
document.” Berg Agency v. Sleepworld-Willingboro, Inc., 136 N.J. Super. 369,
373-74 (App. Div. 1975) (citations omitted); see J&P Int’l Enter. v. Cancer
Treatment Servs. Int’l, L.P., 2010 U.S. Dist. LEXIS 85448, at *2o..21 (D.N.J.
Aug. 19, 2010) (noting that the determination of whether parties intended to be
bound turns on the “document itself,” the “underlying facts relating to the
negotiations,” prior dealings between the parties, industry practice, and
“whether performance that was agreed to by the parties was undertaken.”); see
also Restatement (Second) of Contracts
§ 24 (1981) (“An offer is the
manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that his assent to that bargain is invited and
will conclude it.”).
Contracts can be either bilateral or unilateral. Miller v. Bank of Am. Home
Loan Servicing, L.P., 439 N.J. Super. 540, 54g (App. Div. 2015); Arias v. Elite
Mortg. Sip., Inc., 439 N.J. Super. 273, 276 (App. Div. 2015); see also Wigod,
673 F.3d at 562 (concluding that TPP agreement was “a unilateral offer to
36
modify Wigod’s loan conditioned on her compliance with the stated terms of the
bargain.”). Some courts have concluded that TPPs are unilateral contracts in
which the lender makes an offer (to offer a permanent modification) which calls
for the borrower to accept by rendering performance (by timely making TPP
payments and providing supporting financial documentation). See Miller, 439
N.J. Super. at 549; Arias, 439 N.J. Super. at 276.
Other courts, after reviewing the language in a TPP, have found that it is
simply one step in the application process towards a permanent modification.
Therefore, those courts have concluded, the TPP cannot form the basis of a
breach of contract claim because it contains no guarantee of a permanent
modification. See, e.g., Slimm v. Bank of Am. Corp., 2013 U.S. Dist. LEXIS
62849, at 11 (D.N.J. May 2, 2013); Stolba v. Wells Fargo, 2011 WL 3444078, at
*3 (D.N.J. Aug. 8, 2011); see also Marra v. Wells Fargo Bank, N.A., 2013 WL
4607483, at *3 (App. Div. Aug. 30, 2013) (concluding that TPP “was the first
step of a two-step process,” and did not create contract where TPP stated that
“[t]his [p]lan will not take effect unless and until both Iplaintiff] and [Wells
Fargo] sign it,” and Wells Fargo did not sign TPP).
In Slimm, relied on by Citi, the court held that “[ijt has been previously
recognized that TPPs are explicitly not enforceable offers for loan modifications
because TPPs serve as precursors to final loan modifications, and therefore
are largely conditional in nature.” 2013 WL 1867035, at *11 (internal citations
omitted). However, I find Slimm to be distinguishable the court in Slirnm only
—
addressed whether the TPP created an enforceable contract that required
defendant to permanently modify the plaintiffs loan. Notably, Slimm did not
address the more limited claim that the TPP was a commitment to offer a
compliant loan modification agreement to the plaintiff, which the plaintiff could
then accept or reject.
Similarly, in Stolba, 2011 WL 3444078, at *3 the court found that the
plaintiffs could not plausibly state a breach of contract claim based upon their
TPP. The court, however, based this determination on the language of the TPP
37
documents at issue, which stressed that a borrower “may qualify for a HAM?
TPP” and that a borrower would be offered a permanent loan modification “If we
are able to modify your loan under the terms of the program.” Stotha, 2011 WL
3444078, at *3 (quotations and citations omitted; emphasis in original).
Courts directly addressing the narrower issue have held that a TPP
creates an enforceable agreement to at least offer a permanent loan
*4 (3d
modification. Bukowski v. Wells Fargo Bank, N.A., 2018 WL 6584119,
Cir. Dec. 13, 2018) (“It is well establishing in out Circuit and elsewhere that
TPPs operate as valid contracts.” (citing Giordano v. Saxon Mortg. Sews., 2014
U.S. Dist. LEXIS 137703, at *16 (D.N.J. Sep. 29, 2014) (“Courts analyzing
similar TPPs and allegations have held the TPP is an enforceable contract.”
(collecting cases)))); Wigod, 673 F.3d at 563 (holding that TPP was an offer to
provide permanent modification agreement if borrower fulfilled necessary
conditions);29 Wilson v. Bank of Am., N.A., 48 F. Supp. 3d 787, 813 (E.D. Pa.
2014) (finding that TPP agreement constituted a binding contract “[g]iven the
affirmative promise by Defendant to provide Plaintiff with an Modification
Agreement upon satisfaction of her obligations.”); Laughlin, 2014 WL 2602260,
at *7 (holding that defendant’s “assertion that the TPP did not obligate
[defendantj to provide Plaintiffs with a permanent loan modification as a matter
of law falls short”); Cave v. Saxon Mortgage Servs., Inc., 2012 WL 1957588, *6
(E.D. Pa. May 30, 2012) (holding that TPP was contract obligating defendant to
either offer modification agreement or send plaintiffs a written denial).
I find persuasive the reasoning of these second line of cases, which have
held that a TPP is a unilateral offer to offer a permanent modification, if certain
conditions are met by the borrower. The language of Citi’s TPP Letter creates at
least an issue of fact as to whether that is so.
The court in Wigod rejected the lender’s argument that there was no
consideration underlying the TPP agreement because the debtor was merely making a
partial payment of a debt she already owed. 673 F.2d at 564. The court pointed out
that in entering into the TPP agreement, the debtor agreed to provide additional
financial information and to attend debt counseling if asked to do so, which met the
minimal requirements of consideration. Id.
29
3S
Specifically, the TPP Letter states that “After all trial period payments are
timely made and you have submitted all the required documents, your
mortgage will bepennanently modfied.” (TPP Letter (emphasis added)); see
Fennimore v. Bank of Am., N.A., 2015 U.S. Dist. LEXIS 153980, at *19 (E.D. Pa.
Nov. 12, 2015) (finding TPP enforceable contract where TPP promised “[i]f you
complete the trial period successfully we will offer you a modification of your
Loan.”). The TPP Letter further states that “To qualify for a permanent
modification, you must make the following trial payments in a timely manner.”
(TPP Letter, at 1). In the FAQ section, the TPP Letter is identified as an “offer”
and represents that “Once you [the Heymans] make all of your trial payments
on time, we [Citi] will send you a modification agreement detailing the terms of
the modified loan.” (TPP Letter, at 2).
This language suggests that the TPP Letter is an offer to make an offer—
i.e., a commitment to offer a permanent loan modification agreement provided
certain conditions are fulfilled in the trial period. The Heymans accepted that
offer by making timely TPP payments and submitting “all the required
documents.” To be sure, the letter states that this is merely the “first step
toward quali’ing for more affordable mortgage payments,” which might weigh
against a finding of contractual status. Still, such language will not support
summary judgment for Citi where, as here, other portions of the letter suggest
an enforceable unilateral contract.
Turning to Citi’s statute of frauds argument, New Jersey law requires a
writing signed by the lender if a loan exceeds $100,000. N.J. Stat. Ann.
§
25: 1-5(f), (g); see United States Bank Nat’! Ass’n u. Chimento, 2019 N.J. Super.
Unpub. LEXIS 477, at *34 (App. Div. Mar. 4, 2019). That requirement of a
writing applies to a loan modification. Id. (citing Nat’! Cmty. Bank v. G.L.T.
Indus., 276 N.J. Super. 1, 4 (App. Div. 1994)).
As noted above, however, the TPP is not itself a loan modification
contract; it is a contract to offer a modification agreement, should the Heymans
complete the trial period successfully. See Fennimore, 2015 U.S. Dist. LEXIS
39
153980, at *28 (concluding that statute of frauds did not bar breach of TPP
contract claim because “the TPP is not a loan modification contract; it is merely
a contract for Defendants to provide Fennimore with a modification agreement
if she completes her trial period successfully.”); see also Nickerson-Reti v. Bank
of Am., N.A., 2018 U.S. Dist. LEXIS 83037, at *28 (D. Mass. May 17, 2018)
(“[T}o the extent plaintiff contends that she had a fully enforceable, permanent
modification of her loan and mortgage, the statute of frauds bars that claim.
However, the statute of frauds does not apply to the TPP, which is not an
agreement to modify the loan or the mortgage.”); Aragao v. Mortg. Elec.
Registration Sys., Inc., 22 F. Supp. 3d 133, 139 n.6 (D. Mass. 2014) (“[B]ecause
the alleged contract concerns a modification to the mortgage payment terms,
rather than to the underlying interest in the land, the Massachusetts statute of
frauds does not bar this Court from considering the existence and potential
breach of a non-written contract.”).
Additionally, the New Jersey Statute of Frauds requires only the
§ 25:1-5. The New Jersey
Uniform Electronic Transactions Act, N.J. Stat. Ann. § 12A:12-l to -26,
signature of the “party to be charged.” N.J. Stat. Ann.
provides that an electronic signature satisfies any law requiring a signature.
N.J. Stat. Ann.
§ l2A: 12-7. The TPP Letter contains an electronic signature
from Patricia Ruiz, on behalf of Citi, the “party to be charged.” Accordingly, the
Statute of Frauds would not bar the Heymans’ breach of TPP contract claim,
even if the TPP Letter was subject to the Statute.3° Cf. Fennimore, 2015 U.S.
The Heymans have not alleged in their SAC that the April 30, 2014 telephone
conversation with a Citi representative created a binding contract, nor do they raise it
in the argument section of their brief. The Statute of Frauds would, of course, bar a
breach of contract claim that alleged that Citi offered, and the Heymans accepted, a
modified 2% interest rate based on the April 30, 2013 telephone conversation. (DE
110-3, at 81, Pltfs.’s Ex. C). To the extent that the Heymans contend that they had a
fully enforceable, permanent modification of their loan and mortgage with a twopercent interest rate based on Citi’s oral representation, the Statute of Frauds bars
that claim. At any rate, this term would have been authoritatively superseded by the
TPP Agreement and the executed Loan modification agreement.
3°
40
Dist. LEXIS 153980, at *29 (finding electronic signature of lender’s employee
satisfied Pennsylvania’s Statute of Frauds).
ii. Merits of Contract Claim
The TPP, then, is properly regarded as a contract. A party alleging a
breach of contract must establish (1) the existence of a contract; (2) a breach of
that contract; (3) damages flowing from the breach; and (4) that the
complaining party performed its own contractual duties. See Video Pipeline inc.
v. Buena Vista Home Entm’t, Inc.. 210 F. Supp. 2d 552, 561 (D.N.J. 2002)
(citing Pub. Seru. Enter. Group, Inc v. Phila. Elec. Co., 722 F. Supp. 184, 219
(D.N.J. 1989)). Citi argues that the breach of contract claim fails because the
Heymans cannot demonstrate breach or damages. (DSJBr at 30-3 1).
a. HAMP guidelines as incorporated contractual terms
The Heymans contend that the TPP agreement promised a RAMPcompliant permanent loan modification, provided that the Heymans met their
obligations under the TPP.31 (PSJBr at 28-29). In essence, the Heymans would
incorporate the federal RAMP guidelines as terms of the (future) Modification
Agreement. Accordingly, the failure to provide a Modification Agreement that
complies with RAMP guidelines would be a breach of the TPP.
Whether a contract term is “clear or ambiguous is
...
a question of law.”
Kaufman v. Provident Life and Cas. Ins. Co., 828 F. Supp. 275, 282 (D.N.J.
1992), aff’d, 993 F.2d 877 (3d Cir.1993). “An ambiguity in a contract exists if
the terms of the contract are susceptible to at least two reasonable alternative
interpretations.” Id. at 283. To determine the meaning of the terms of an
agreement, the terms of the contract must be given their plain and ordinary
meaning. Id. A “court should not torture the language of [a contract] to create
ambiguity.” Stiefel v. Bayly, Martin & Fay, Inc., 242 N.J. Super. 643, 651
(1990). “In addition to the express terms of a contract, terms may be implied in
fact and enforceable [b]y interpretation of a promisor’s word and conduct in
light of the surrounding circumstances.” Zelnick v. Morristown-Beard Sch., 445
Citi does not dispute that the Reymans met their obligations under the TPP.
41
N.J. Super. 250, 260 (Law Div. 2015) (quoting Wanaque Borough Sewerage
Auth. v. Twp. of W. Milford, 144 N.J. 564, 574 (1996)).
Citi does not really dispute that that the TPP contemplated that the loan
modification agreement to be offered in the future would be RAMP-compliant.32
For example, the TPP Letter to the Heymans states that the trial period plan
was being offered “under the Home Affordable Modification Program.” (TPP
Letter, at 1). The bottom of the letter further states that the “Making Home
Affordable program was created to help millions of homeowners of homeowners
refinance or modify their mortgages. As part of this program, we
mortgage servicer
—
—
your
and the Federal Government are working to offer you
options to help you stay in your home.”
At this summary judgment stage, the Heymans are entitled to the benefit
of an interpretation that would incorporate RAMP regulations as implied terms
*4 (“Here, the Bukowskis
in the contract. See Bukowski, 2018 WL 6584119, at
allege that Wells Fargo issued them a TPP that promised to offer a permanent
HAMP modification that complied with RAMP’s guidelines. After receiving the
Bukowskis’ timely payments, Wells Fargo issued them a RAMP modification
that allegedly contravened RAMP’s guidelines. These allegations are sufficient
to state a plausible breach of contract claim.”); Patrick v. CitiMortgage, Inc.,
2014 Bankr. LEXIS 5115, at *32 (Bankr. N.D. Ohio Dec. 22, 2014) (holding
that incorporation of RAMP into a validly executed contract may give rise to
liability under state law breach of contract theory); see also Wigod, 673 F.3d at
As to incorporation by reference, New Jersey contract law requires that an
extrinsic document “be described in such terms that its identity may be ascertained
beyond doubt and the party to be bound by the terms must have had ‘knowledge of
and assented to the incorporated terms.” Alpert, Goldberg, Butler, Norton & Weiss, P.C.
u. Quinn, 410 N.J. Super. 510, 533 (App. Div. 2009) (quoting 4 Williston on Contracts
§ 30:25 (Lord ed. 1999)).
Every’ contract must be examined “in light of the common usage and custom
and consider[ingl the circumstances surrounding its execution.” Pacfico v. Pacfico,
190 N.J. 258, 267 (2007); see also Marchak u. Claridge Commons, Inc., 134 N.J. 275,
282 (1993) (“When reading a contract, our goal is to discover the intention of the
parties. Generally, we consider the contractual terms, the surrounding circumstances,
and the purpose of the contract.”).
32
42
565 (noting that “HAMP guidelines unquestionably informed the reasonable
expectations of the parties” that any permanent modification agreement offered
after completion of the trial period would comply with HAM?.).
b. Claims that Modfication was not HAMP-compliant
This section of the Heymans’ brief reargues the point that that Citi (or its
Trustee) were not authorized to offer a permanent loan modification because
the assumption and modification provisions of the PSA did not permit it.
(PSJBr at 29). I have already rejected that argument. As noted above, the cited
provision applies if a mortgagor, like the Heymans, transfers the mortgaged
property to a non-signatory of the loan. That provision is plainly inapplicable to
the Heymans’ loan modification under RAMP. See n. 18, supra.
The facts section of the Heymans’ brief, however, cites several RAMP
Guidelines that could be applicable to their breach of contract claim: (1) the
5.25% interest rate violated an “interest rate cap” (PSJBr at 8 (citing Guidelines
6.3.1.2 and 9.3.6)); (2) Citi determined that the Reymans’ gross income was
$2,005.00, but the monthly payment was set at $3,438.76, which was more
than 31% (PSJBr at 9 (citing Guideline 6.1.2)); and (3) Citi failed to waive late
fees (PSJBr at 9 (citing Guidelines 9.3.2 and 6.3.1.1)). (See PSJBr at 18). 1
address these Guidelines in turn.
Interest Rate Cap. First, the Heymans contend that the 5.25% interest
rate violates HAMP Guidelines 6.3.1.2 and 9.3.6. (PSJBr at 8); see Making
Home Affordable Program Handbook for Servicers of Non-GSE Mortgages,
Version 4.2 (May 1, 2013) (hereinafter “Guidelines”).33 Guideline 6.3.1.2, which
is Step 2 in the waterfall method, makes clear that 2% is the interest rate
Citi reviewed the Heymans’ loan modification under Version 4.2 of the HAMP
Guidelines. (DE 110-3, at 56, Pltf.’s Ex. B). Neither party attached the guidelines to
their briefing, however, the Guidelines are publicly available. See Making Home
Affordable Program Randbook for Sen’icers of Non-GSE Mortgages, Version 4.2 (May
1, 2013), available at
https: / /www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_4
2.pdf.
33
43
“floor”; it does not mandate a 2% interest rate for all borrowers. Guidelines, at
1O6.
Pointing to Guideline 9.3.6, the Heymans argue that 5.25% rate exceeded
the Guidelines-mandated interest rate “cap.” That capped rate is set in
reference to the “Freddie Mac Primary Mortgage Market Survey (PMMS) Rate for
30-year fixed rate conforming loans, rounded to the nearest 0.125 percent, as
of the date that the Modification Agreement is prepared.” Guidelines, at 125.
The PMMS Rate in August of 2013, when the Modification Agreement became
effective, was approximately 4,5%. See Freddie Mac, “30-Year Fixed-Rate
Mortgages Since 1971,” available at
www.freddiemac.com/pmms/pmms30.htm1.
In this respect, however, the Heymans misconstrue the import of the
Interest Rate Cap Guideline. Guideline 6.3.1.2 provides insight on the
implications of Guideline 9.3.6. This is not a simple cap on the rate that can
apply. Rather, in the second step of the waterfall method, the servicer reduces
the borrower’s current interest rate in 0.125 percentage-point increments to
“get as close as possible to the target monthly mortgage payment ratio.”
Guidelines, at 106. If the resulting interest rate is below “the Interest Rate Cap
(as defined in Section 9.3.6),” this reduced rate is in effect for the first five years
of the modified agreement. Id. Thereafter, the interest rate increases annually
by one percent “until the interest rate reaches the Interest Rate Cap, at which
time the rate will be fixed for the remaining loan term.”
However, “ji]f the resulting rate exceeds the Interest Rate Cap, then that
rate is the permanent rate.” Id. The Guideline that governs Step 2 of the
waterfall method explicitly recognizes that the interest rate may exceed the
PMMS rate, provided that the servicer stays within the 31% ratio. Guidelines,
at 106. (More about the 31% ratio in the paragraphs immediately following.)
Therefore, Guideline 9.3.6 does not impose an absolute bar to an interest rate
I address the related fraud claim that the Heymans were misled into thinking
the rate would be 2% in Section IV.Q., infra.
44
above the PMMS Rate. The Heymans have failed to demonstrate a breach on
this basis.
31% Income Ratio. The real heart of the Heymans’ claim is therefore
the argument that the overall monthly payment exceeded 31% of their income,
in violation of RAMP guidelines. (PSJBr at 9). “A showing that CitiMortgage
improperly calculated Debtor’s mortgage payments under the Modification
Agreement would satisfy the third element [breach], and any difference between
the proper and improper payment would create damages.” In re Patrick, 2015
Bankr. LEXIS 1407, at *11 (Bankr. N.D. Ohio Apr. 23, 2015), adopted by 2016
U.S. Dist. LEXIS 38739 (N.D. Ohio Mar. 24, 2016), aff’d, 676 Fed. App’x 573
(6th Cir. 20l7).
Various Guidelines refer to the “target monthly payment ratio” for a
RAMP Tier 1 modification as 31% of the borrower’s monthly gross income.
Guidelines, at 70 (Guideline 1.1.2, “RAMP Tier 1 Eligibility Criteria” (providing
that borrower is eligible for modification if monthly mortgage payment “is
greater than 31 percent of the borrower’s verified monthly gross income.”)); 101
(Guideline 6.1, “Monthly Mortgage Payment Ratio”); 105 (Guideline 6.3.1,
“RAMP Tier 1 Standard Modification Waterfall” (providing that “servicers must
apply the modification steps enumerated below in the stated order of
succession until the borrower’s monthly mortgage payment ratio is reduced to
31 percent”)). Guideline 6.1.2, “Monthly Mortgage Payment,” provides that the
monthly mortgage payment ratio should take into account “the monthly
payment of principal, interest, property taxes,” and escrow shortage amounts.
“District courts in this circuit have routinely recognized these trial modification
related injuries as cognizable breach of contract damages.” Block v. Seneca Mortg.
Servicing, 221 F. Supp. 3d 559, 577 (D.N.J. 2016); Smith v. Saxon Mortg. Servs., Inc.,
2013 WL 1915660, at *7 (E.D. Pa. May 9, 2013) (finding damages where plaintiff
claimed “payment of increased interest, longer loan payoff times, higher princip[al]
balances, deterrence from seeking other remedies to address their default and/or
unaffordable mortgage payments, damage to their credit, additional income tax
liability, Land] costs and expenses incurred to prevent or fight foreclosure.”); see also
Wigod, 673 F.3d at 575 (concluding plaintiff established pecuniary loss where she
“incurred costs and fees, lost other opportunities to save her home [and] suffered a
negative impact to her credit.”).
35
45
The Modification Agreement here does not state the Heymans’ gross
income. (See Modification Agreement). The monthly payment under the TPP
was calculated to be $3438, however; for that to fall within the guideline of
31% of monthly income, then the monthly income would have to have been at
least $11,090.36 And Citi’s Servicer Case Resolution document did indeed
report a monthly income figure of $11,090.17. (Pamela Decl. Ex. F) At oral
argument, counsel for plaintiff acknowledged that her client was required to
and did supply financial information to Citi so that it could perform the HAMP
calculation. At the time of the TPP, Heyman was represented by counsel
(current counsel’s predecessor).
The Heymans point, however, to a discrepancy in Citi’s documents. The
TPP letter states in the “FAQ” section that “[yjour trial payment is
approximately 31% of your total gross monthly income, which we determined
to be $2,005.00 based upon the income documentation you provided.” This,
says Heyman, establishes that his income was $2,005 per month.
(TPP Letter, p.2). That same letter, however, states unequivocally that the
monthly trial payment is $3438, and includes coupons for payment in that
amount. In this regard, I point out again that the Heymans were represented
by experienced counsel in this transaction.
Mr. Heyman testified that Citi “determined my income at $2,005, and the
payment on the front shows 3,438, so it didn’t quite make sense. It’s 31
percent of my income.” (Mr. Heyman Dep. 1 12:20-23). He also testified that the
$2,005 figure did not seem accurate, but that he could not remember his
income in August of 2013. (Id. at 1 12:7-9; 222:14-18).
Mr. Heyman seeks to create a triable issue of fact as to whether $3438
(or $3446) exceeded 31% of his gross monthly income at the time. He has,
however, failed—indeed, declined—to put in any evidence or make any
statement as to his actual gross monthly income in 2013. At oral argument, I
The monthly payment under the Modification Agreement ($3,446) would imply a
very slightly higher monthly income of S 11,117.
36
46
repeatedly queried plaintiffs’ counsel as to the true income figure. Consulting
with her client, who was at her side, she could state only that her client’s
income was “not” $11,000, and that it “fluctuated.”
The Heymans point to an August 30, 2018, email from their counsel to
Citi stating that Heyman’s gross monthly income was yet another figure,
$2,400, while also suggesting that $2,400 represented not gross income, but
31% of gross income. (DE 110-3, at 103-104). In the answer to the email, the
Citi representative, Ms. Ruiz, did not agree, but confirmed that the monthly
payment, calculated under RAMP guidelines, was $3446. (Id. at 104) Ms. Ruiz,
was a customer service representative or SPOC (“single point of contact”). She
was not the underwriter, and she had no authority to correct or change the
computerized calculation. (Ruiz Dep. pp. 21—23, 59—63, DE 110-3 at 131—33,
169—73). Afortiori, an email from the borrower’s counsel to Ms. Ruiz would not
affect the income figure or resulting calculations. There is no evidence that the
Reymans’ counsel rejected this correction or followed up. On the contrary, the
Heymans accepted the Modification Agreement, executed it, and made one
payment under it before declaring bankruptcy.
The parties have had a full opportunity for discovery, and neither side
points to any evidence, whether tax returns, receipts, or anything else, of what
Mr. Heyman’s income was in the relevant period in 2013. Citi’s records do not
break down the calculations, but there is evidence that Citi applied the RAMP
guidelines to arrive at a figure that would not exceed 31% of monthly income.
Heyman claims the figure did exceed 31% of his monthly income, but does not
state what his income was, despite the fact that he necessarily possesses that
information. He instead chooses to pick apart inconsistencies in statements by
Citi representatives (whose information necessarily came from him or his
counsel) about what his income was. There is no evidence sufficient to create
an issue of fact on this point.
Escrow, The Heymans make much of a statement in an email by
Patricia Ruiz to the effect that “HAMP only covers principal and interest
payments. It does not include escrow and never has.” (D 110-3, at 102). This
47
misstatement, if that is what is was, is inconsequential. It adds nothing to the
31% income claim discussed immediately above, and there is no evidence of
the Heymans having paid anything in excess of $3446 monthly.
The monthly payment of $3446 (as noted, a negligible increase over the
TPP amount of
$
3438) included escrow. See Modification Agreement, DE 110-3
at 92 (Principal and Interest: $2120.82; Escrow: $1325.74; Total monthly
payment: $3446.56). So there is no independent HAMP noncompliance based
on escrow unless that total figure of $3446 exceeded 31% of income.37 That
claim I have already discussed and rejected.
Late Charges. Next, the Heymans state that Citi failed to waive unpaid
late charges. (PSJBr at 9). Guideline 9.3.2. provides that “All late charges,
penalties, stop-payment fees, or similar fees must be waived upon the
borrower.” Guidelines, at 124; see also Guidelines, at 106 (Guideline 6.3.1.1
(“Late fees may not be capitalized and must be waived if the borrower satisfies
all conditions of the TPP.”)).
All the evidence suggests that the late fees were in fact waived. In
determining the modified principal balance, the Modification Agreement notes
that the Heymans owed “$0.00” in “accrued unpaid late charges.” (Modification
Agreement, §3(E)). The modified principal balance in the Modification
Agreement therefore did not include prior late fees. The language of the
Then-counsel for the Heymans, Mr. Schlachter, wrote the following to Ms. Ruiz:
I see the apparent error. HAMP has a payment of principal, interest, and
escrow is 31% of gross income. Gross income is $2,400 for Mr. Heyman.
So I think the mod was given a high interest rate when underwriting
forgot about Escrow. We would like to OFFICIALLY open a HAMP appeal.
I would like underwriting to review Mr. Heymans’ income again.
Undenvriting will see that 31% is only 52,400 and that principal, interest
AND escrow has to fit into that.
(DE 110-3, at 103-104). Again, however, a fact is not established by virtue of the
party’s counsel having written it. Still lacking is any proof of Mr. Heyman’s monthly
income.
37
48
Modification is clear and unambiguous and does not require the Court to look
beyond the four corners of the document.38
To establish that the Heymans were charged late fees, the Heymans cite
a monthly statement from September of 2012. (PSJBr at 9 (citing DE 110-3, at
109, Pltf.’s Ex. D)). At that time, the Heymans owed $1,956 in late fees. (Id.).
That statement, however, predates the Modification Agreement by almost a
year. It does not demonstrate that the later Modification Agreement
impermissibly capitalized or did not waive those fees. That the Heymans at one
point owed late fees does not establish that Citi later breached the HAMP
Guidelines, Accordingly, the Heymans have not established that Citi failed to
offer a RAMP-compliant permanent loan modification on this basis.
Accordingly, summary judgment will be granted on the Heymans breach
of contract claim.
E. Promissory Estoppel, Unjust Enrichment
Citi moves to dismiss the Heymans’ tort claims for promissory estoppel,
unjust enrichment, and conversion, citing the economic loss doctrine. (DSJBr
at 31-33). Citi further moves to dismiss the promissory estoppel and unjust
enrichment claims because an express contract governed the parties’
relationship and obligations. The Heymans address the economic loss doctrine
only as it relates to the promissory estoppel claim. (PSJBr at 22).
“Under New Jersey law, liability based on quasi-contractual principles
cannot be imposed ‘if an express contract exists concerning the identical
matter.” Hillsborough Rare Coins, LLC v. ADTLLC, 2017 U.S. Dist. LEXIS
67113, at *15 (D.N.J. May 2, 2017) (quotation omitted); see also Suburban
Transfer Seru., Inc. v. Beech Holdings, Inc., 716 F.2d 220, 226-27 (3d Cir. 1983)
(“Quasi-contract liability will not be imposed, however, if an express contract
exists concerning the identical subject matter.”).
Citibank also includes a payment history, difficult to comprehend, which is said
to confirm that the late fees were waived. (DE 104-3, at 64 (Ex. I)).
38
49
Promissory estoppel is such a quasi-contract theory and it “cannot be
maintained where a valid contract fully defines the parties’ respective rights
and obligations.” Id. (citing Hill v. Commerce Bancorp, Inc., 2012 WL 694639, at
*14 (D.N.J. Mar. 1, 2012) (holding that party “cannot prevail on both a breach
of contract and promissory estoppel theory for the same conduct, since
promissory estoppel by its definition assumes that a contract supported by
consideration has not been formed.”)). “[Promissory estoppel generally serves
as a stopgap where no valid contract exists to enforce a party’s promise.” Kiss
*5
Elec., LLC a Watenvorld Fiberglass Pools, N.E., Inc., 2015 WL 1346240, at
(D.N.J. Mar. 25, 2015). Unjust enrichment and promissory estoppel are both
“quasi-contract theories that are unavailable when a valid contract exists.”
Hillsborough Rare Coins, 2017 U.S. Dist. LEXIS 67113, at *16.
The Heymans’ promissory estoppel and unjust enrichment claims are
entirely premised on the TPP agreement. The Heymans claim that “Citi
promised the Heymans an affordable HAMP modification which would conform
with certain terms including a promise of waiving ‘prior late fees’ and a ‘2%
with 3% lifetime interest rate’ and being capped at 31% including the taxes and
escrow.” (PSJBr at 21). The Heymans further claim that “plaintiffs did not
receive such a modification after completing a HAMP TPP.” (PSJBr at 21; see
PSJBr at 22 (“the defendant made a promise for a definite benefit, an affordable
modification.”)). As to unjust enrichment, the Heymans argue that “defendant
pocketed the plaintiff’s payments made for a HAMP TPP,” but failed to provide a
RAMP-complaint permanent modification. (PSJBr at 30).
These same facts underlie the breach of contract claim, which premises
liability on an indistinguishable theory. An express contract is a bar to
promissory estoppel and unjust enrichment claims under New Jersey law when
an express contract exists and addresses the subject matter at issue. The
wrongdoing alleged under the Heymans’ promissory estoppel and unjust
enrichment claims is intrinsic to the terms and conditions of the enforceable
TPP. Because there is an express contract governing the subject matter of the
50
promissory estoppel and unjust enrichment claims, those claims are
*9 (D.N.J.
dismissed.39 See Ebner v. Statebridge Co., LLC, 2017 WL 2495408, at
June 9, 2017) (noting that unjust enrichment is an equitable remedy and only
available when there is no express contract).
F. Conversion
As to tort claims arising in a contractual context, the court will apply the
similar but distinct economic loss doctrine.40 “Under New Jersey law, the
The Hevmans concede that “Cifi correctly points out that if there is a[nj existing
contract, the unjust enrichment claim cannot stand.” (PSJBr at 30). Despite that
concession, the Heymans assert that “plaintiffs are permitted to plead in the
alternative and there are incentives that would cause Citi to mislead plaintiffs as it did
with thousands of homeowners.” (Id.). While it is true that the Federal Rules permit
pleading in the alternative, this matter is at the summary judgment stage, at which
point facts and theories are expected to have cn’stallized. See Carlson v. Ar-not-Ogden
Mem’lHosp., 918 F.2d 411, 416 (3d Cir. 1990) (affirming grant of summary judgment
on promissory estoppel claim where there was an express contract); In re U.S. W, Inc.
Sec. Litig., 201 F. Supp. 2d 302, 308 (D. Del. 2002) (granting summary judgment on
promissory estoppel claim where express contract governed parties’ relationship);
Iversen Baking Co. v. Weston Foods, 874 F. Supp. 96, 102 (E.D. Pa. 1995) (holding
same); Myservice Force v. Am. Home Shield, 2013 U.S. Dist. LEXIS 7027, at *65 (ED.
Pa. Jan. 17, 2013) (holding same); Edelen & Boyer Co. v. Kawasaki Loaders, Inc., 1993
U.S. Dist. LEXIS 5916, at *6 (ED. Pa. May 3, 1993) (granting summary judgment on
promissory estoppel and unjust enrichment claim where parties’ relationship was
governed by an express contract).
The parties have identified a contract that defines the parties’ respective tights
and obligations. Even on a l2(b)(6) motion, courts have not hesitated to dismiss quasicontract claims that are based on the same facts as a plaintiffs contract claim. See
Hillsborough Rare Coins, LLC, 2017 U.S. Dist. LEXIS 67113, at *17 (dismissing with
prejudice promissory’ estoppel claim where express contract governed parties’
relationship); Smith, 2015 U.S. Dist. LEXIS 171933, at *23 (dismissing promissory
estoppel and unjust enrichment claims based on the same facts and theory as
contract claim); Kinney Bldg. Assocs., L.L.C. v. 7-Eleven, Inc., 2016 U.S. Dist. LEXIS
63864, at *14 (D.N.J. May 16, 2016); Emtec Inc., a Condor Tech. Solutions, Inc., 1998
WL 834097, at *2..3 (E.D. Pa. Nov. 30, 1998) (plaintiff denied leave to amend complaint
to include unjust enrichment claim because parties’ relationship was based on
express written contract).
40
“The preclusion inquiry in the promissory esloppel context is distinct from the
economic loss doctrine.” Hunter v. Sterling Bank, 750 F. Supp. 2d 530, 547 n.9 (E.D.
Pa. 2010). Promissory estoppel and unjust enrichment are more properly recognized
as “quasi-contract” theories, as opposed to tort theories imposing an independent legal
duty. See Hunter, 750 F. Supp. 2d at 547 n.Y (“Whether an independent legal duty
exists is not relevant in the context of a promissory’ estoppel claim, which centers
around a clear and definite promise, as opposed to a general legal duty.”); see also
39
51
economic loss doctrine ‘defines the boundary between the overlapping theories
of tort law and contract law by barring the recoven’ of purely economic loss in
tort, particularly in strict liability and negligence cases.”’ Travelers Indem. Co.
v. Dammann & Co., 594 F.3d 238, 244 (3d Cir. 2010) (quoting Dec11 v. Barrett
Homes, Inc., 406 N.J. Super. 453, 470 (App. Div.), rev’d on other grounds, 200
N.J. 207 (2009)). “The purpose of the rule is to strike an equitable balance
between countervailing public policies[j that exist in tort and contracts law.” Id.
(quoting Dean, 406 N.J. Super. at 470).
“Whether a tort claim can be asserted alongside a breach of contract
claim depends on whether the tortious conduct is extrinsic to the contract
between the parties.” Arcand v. Brother Int’l Corp., 673 F. Supp. 2d 282, 308
(D.N.J. 2009) (citing Touristic Enterprises Co. v. Trane Inc., 2009 U.S. Dist.
LEXIS 106145, at *56 (D.N.J. Nov. 13, 2009); CapitalPlus Equity, LLC v.
Prismatic Dev. Corp., 2008 U.S. Dist. LEXIS 54054, at *1718 (D.N.J. July 16,
2008)); see also D&DAssocs. Inc. v. Rd. of Ethic, of N. Plainfield, 2012 WL
1079583, at
*
36 (D.N.J. Mar. 30, 2012) (“Whether a tort claim can be asserted
alongside a breach of contract claim depends on whether the tortious conduct
is extrinsic to the contract between the parties.”).
Thus, the “critical issue” is whether the conduct underlying the tort
claim is “extraneous to the contract.” Bracco Diagnostics, Inc. v. Bergen
Bninswig Dnig Co., 226 F. Supp. 2d 557, 563 (D.N.J. 2002); see Sunburst
*3 n.3 (E.D. Pa.
Paper, LLC v. Keating Fibre Int’l, Inc., 2006 WL 3097771, at
Oct. 30, 2006) (noting that to avoid application of economic loss doctrine,
plaintiff must articulate “harm that is distinct from the disappointed
expectations evolving solely from an agreement.”) (citation omitted).4’
Smith v. CitiMortgage, Inc., 2015 U.S. Dist. LEXIS 171933, at *22 (D.N.J. Dec. 22,
2015). The cases cited by Citi do not address the applicability of the economic loss
doctrine to a promissory estoppel claim. I confine the economic loss analysis to the
tort claims.
41
The underlying rationale of the economic loss doctrine is that “[t]ort principles
are better suited for resolving claims involving unanticipated injuries, and contract
principles are generally more appropriate for determining claims for consequential
52
Regarding the conversion claim, the Heymans assert that “defendant
took plaintiff’s monies paid under a false and fraudulent pretense of getting
HAMP compliant modification with materially made promises that it would be
affordable and enable the Heymans to retain their property while CMI had/has
no legal cognizable ownership of the ‘loan.” (PSJBr at 23; see PSJBr at 27
(“plaintiffs did not receive the benefit of the payments they made under the TPP
but Citi did receive a benefit, it not only kept the plaintiffs money and never
made any accounting of that money but also it received payments from the
federal government for each RAMP loan that it made.”)).
These allegations of conversion are not distinct from or extrinsic to the
contractual relationship and the obligations that arose from the TPP
agreement. See Espaillat v. Deutsche Bank Nat’? Tr. Co., 2015 U.S. Dist. LEXIS
66395, at *10 (D.N.J. May 21, 2015) (dismissing tort-based claims that were
“rooted in a contractual relationship between the parties based upon the
executed Note and Mortgage.”); see also Longo v. Envtl. Prot. & Improvement
Co., 2017 U.S. Dist. LEXIS 85681, at *18 (D.N.J. June 5, 2017) (conversion
claim barred by economic loss doctrine); Torus United States Servs., lhc. v.
Hybrid Ins. Agency, LLC, 2015 U.S. Dist. LEXIS 144025, at *17 (D.N.J. Oct. 22,
2015) (dismissing conversion claim based on economic loss doctrine); D&D
Assocs. v. Rd. of Educ., 2012 U.S. Dist. LEXIS 44887, at *109 (D.N.J. Mar. 30,
2012) (concluding economic loss doctrine barred conversion claim); Innospec
Fuel Specialties, LLC v. Isochem N. Am., LLC, 2010 U.S. Dist. LEXIS 152843, at
*14 (D.N.J. Aug. 19, 2010) (“both Plaintiffs conversion and negligent
misrepresentation claims rely solely on the terms of the contract rather than on
any alleged extraneous conduct and are barred by the economic loss
doctrine.”); Titan Stone, The & Masonry, Inc. v. Hunt Constr. Grp., Inc., 2007
damages that parties have or could have address[ed] in their agreement.” Arcand, 673
F. Supp. 2d at 308 (quotation omitted). “The Economic Loss Doctrine is based on the
principle that economic expectations between parties to a contract are not entitled to
supplemental protection by negligence principles.” Saratoga at Toms River
*5 (App. Div. July
Condominium Ass’n, Inc. v. Men/c Corp., Inc., 2014 WL 3510872, at
17, 2014) (citation omitted).
53
U.S. Dist. LEXIS 4661, at *13 (D.N.J. Jan. 22, 2007) (dismissing conversion
claim under the doctrine of economic loss). The claim that Citi “converted” the
Hemans’ loan payments is premised on the claim that it was disentitled to
them by virtue of its breach of contract.
Where a tort claim is nothing more than a recasting of a claim of breach
of contract, it is barred by the economic loss doctrine. I therefore grant Citi’s
motion for summary judgment dismissing the conversion claim.
G. Negligent Misrepresentation
Citi moves for summary judgment on the Heymans’ negligent
misrepresentation claim, asserting that there is no duty of care between a
lender and borrower independent of their contractual relations. (DSJBr at
36).42 “Under New Jersey law, a tort remedy does not arise from a contractual
relationship unless the breaching party owes an independent duty imposed by
law.” Saltiel v. GSI Consultants, Irza, 170 N.J. 297, 316 (2002); see Strachan v.
John F. Kennedy Mem’l Hosp., 109 N.J. 523, 529 (1988); Paradise Hotel Corp. v.
Bank of Nova Scotia, 842 F.2d 47, 53 (3d Cir. 1988). Moreover, “[t]he question
of whether a duty exists is a matter of law properly decided by the court, not
the junr, and is largely a question of fairness or policy.” Wang v. Allstate Ins.
Co., 125 N.J. 2, 15 (1991).
If a defendant “owe[s] a duty of care separate and apart from the contract
between the parties,” a tort claim, such as negligence, may exist. Saltiel, 170
N.J. at 314. But the mere failure to fulfill obligations encompassed by the
parties’ contract is not actionable in tort. Id. at 3 16-17. Moreover, a claim for
negligent misrepresentation is barred where a plaintiff has not identified a duty
owed independent of the contractual relationship. Smith, 2015 U.S. Dist. LEXIS
171933, at *21 (citing Perkins v. Washington Mutual, FSB, 655 F. Supp. 2d 463,
A claim for negligent misrepresentation requires proof of the following elements:
“(1) an incorrect statement (2) negligently made, (3) upon which a plaintiff justifiably
relied, (4) and which resulted in economic loss or injury as a consequence of that
reliance.” Sarlo v. Wells Fargo Bank, N.A., 175 F. Supp. 3d 412, 425 (D.N.J. 2015); see
also Premier Health Assocs., LLC v. Med. Tech. Sols., 2018 U.S. Dist. LEXIS 144274, at
*22..23 (D.N.J. Aug. 24, 2018).
42
54
471 (2009) (finding that economic loss doctrine barred negligence claim
brought by plaintiff-mortgagor against defendant-mortgagee because both were
parties to the mortgage contract and there was no other duty owed)); see also
Skypala a Moflg. Elec. Registration Sys., 655 F. Supp. 2d 451, 461 (D.N.J.
2009).
“[Cjourts have declined to recognize negligent misrepresentation claims
arising out of a lender’s alleged breach of duty during the loan modification
process.” Hadman a Wells Fargo Bank N.A., 2015 Bankr. LEXIS 2783, at *18
(Bankr. D.N.J. Aug. 19, 2015), aff’d, 2019 U.S. App. LEXIS 3745, at *6 (3d Cir.
Feb. 6, 2019) (citing Legore v. One West Bank, FSB, 898 F. Supp. 2d 912, 919
(D. Md. 2012) (dismissing mortgagor’s negligent misrepresentation claim
because lender’s obligation to review loan modification application under RAMP
“does not create the ‘special circumstances’ required to form a tort duty under
Maryland law”); Wigod, 673 F.3d at 573-74 (dismissing mortgagor’s negligent
misrepresentation claim against servicer because any duties servicer may have
had to “provide accurate information to Ithe Plaintiff] arose directly from their
commercial and contractual relationship” and therefore “do not sound in the
torts of negligent misrepresentation.”)); see also Del. Valley Bindery Inc. a
Ramshaw, 2017 U.S. Dist. LEXIS 150921, at *13 (D.N.J. Sep. 18, 2017)
(holding same); Rost, 2015 U.S. Dist. LEXIS 148703, at *16 (holding same).
The Court agrees with Citi that the Heymans have not set forth a duty of
care separate and apart from the alleged contractual relationship. The
Heymans’ opposition makes clear that their negligent misrepresentation claim
is based on the parties’ course of dealing during the loan modification process.
(See PSJBr at 24 (“The Heymans relied upon information
...
that they were
being considered For a RAMP modification and submitted new confidential
documents in order to be evaluated for one, and subsequently made the RAMP
TPP payments[.j
.
.
.
CMI clearly knew RAMP would not be available for the
loan.”).
55
In addition, the Heymans cite Congressional testimony of Citi’s CEO
Vikram S. Pandit from March of 2010, and argue that Citi has admitted that it
owes such a duty. (PSJBr at 26). This testimony does not relate to the
Heymans and their loan modification process, it predates the events of this
case, and it does not address the legal issue of a duty of care. It provides no
basis for the Court to depart from well-established case law holding that a loan
servicer does not owe a mortgagor a duty of care outside of the obligations
imposed by their contractual relationship. Accordingly, summary judgment will
be granted to Citi on the Heymans’ negligent misrepresentation claim.
H. Consumer Fraud Act
i. Whether CFA claim is barred by HAMP
Citi argues that there is no private right of action under RAMP, and that
any CFA claim based on a violation of RAMP regulations must therefore be
dismissed. (DSJBr at 16-17 (citing Sinclair, 519 Fed. App’x at 730 (citation
omitted); Bukowski v. Wells Fargo Bank, N.A., 2017 WL 4077015 (D.N.J. Sept.
14, 2017), aff’d in pan, vacated in part, remanded, 2018 WL 6584119 (3d Cir.
Dec. 13, 2018); Slimm, 2013 U.S. Dist. LEXIS 62849).
13
The testimony quoted by the Reymans is as follows:
And, in 2009, we provided $439.8 billion of new credit in the U.S.,
including approximately 580.5 billion in new mortgages and S80.l billion
in new credit card lending. We have carefully tracked and accounted for
our use of TARP capital, which we used specifically to support new
lending to individuals, families, communities and businesses in the U.S.
This week, we published our fifth quarterly TARP report providing
transparency on how we have used TARP capital to help support new
U.S. lending initiatives. Taxpayers have a right to know how their
investment was put to use, and we were the only bank to publish regular
reports on the use of TARP money.
(PSJBr at 25-26) (quoting
http: / / online.wsj .com/public/resources/documents/testimony-20 100304pandit.pdf).
I also note that the Heymans’ argument in support of its negligent
misrepresentation claim raises fraud and the elements of fraud a claim that has not
been pled. (PSJBr at 25). The Court will not entertain this new claim, raised for the
first time in opposition to a summary judgment motion. See Bey, 2006 WL 361385, at
*11.
—
56
Citi principally relies on the District Court’s decision in Bukowski, 2017
WL 4077015. (DSJBr at 17). In that case, the plaintiffs applied for a loan
*1. Wells
modification under RAMP with Wells Fargo. 2017 WL 4077015 at
Fargo provided plaintiffs with a three-month TPP, which stated that plaintiffs
would receive a permanent modification provided that their three trial
payments were submitted on time. Id. After plaintiffs timely made their TPP
payments, Wells Fargo sent plaintiffs a permanent loan modification
agreement, which required plaintiffs to make “an interest bearing lump sum
*3 That newly-unveiled term
payment” of approximately $152,819.03. Id. at
violated RAMP and was not provided for in the TPP. Id. Based on the RAMP
violation, the plaintiff asserted a state-law CFA claim.
The U.S. Court of Appeals for the Third Circuit reversed the District
Court’s dismissal of the CFA count, recognizing that while “HAMP does not
provide a private cause of action,” that “does not mean that it precludes state
*3 (citing Wigod, 673
law claims altogether.” Bukowski, 2018 WL 6584119, at
F.3d at 581 (“The absence of a private right of action from a federal statute
provides no reason to dismiss a claim under a state law just because it refers
to or incorporates some element of the federal law.”)).44 The Third Circuit
reasoned that the plaintiffs’ “complaint does not allege a stand-alone RAMP
violation; instead, it alleges that Wells Fargo violated the NJCFA by making
New Jersey courts “have ‘adopt[edj the Seventh Circuit’s Wigod position that *3
RAMP does not preclude state-law based claims.’” Bukowski, 2018 WL 6584119, at
*4;• In Wigod, the Seventh Circuit explained
(quoting Smith, 2015 WL 12734793, at
that the plaintiffs state-law claims did “not allege that Wells Fargo engaged in unfair
Rather, the plaintiff
or deceptive business practices by violating HAMP guidelines.
ation and omission of material facts misled
contended that ‘Wells Fargo’s misrepresent
[the plaintiff] to believe she would receive a permanent modification under RAMP and
that it implemented its RAMP compliance procedures in a way designed to thwart
*3 (quoting
borrowers’ legitimate expectations.” Bukowski, 2018 WL 6584119, at
Wigod, 673 F.3d at 585-86).
Similarly, in Bukowski, the plaintiffs claimed that that they were misled by
Wells Fargo’s representations “concerning their eligibility for a permanent HAMP
modification,” and that those representations violated the CFA. Bukowski, 2018 WL
6584119, at4.
.
57
.
.
material misrepresentations, which in turn led the couple to believe that their
permanent modification would be RAMP-compliant.” Id.
Like the Third Circuit in Bukowski, I must conclude that “HAMP in no
way precludes state law causes of action” under the CFA. See Id. The CPA
claim is distinct from a (nonexistent) HAMP claim, because the Heymans assert
that they were misled into believe they would receive a RAMP-compliant loan
modification but did not in fact receive it. See Laughlin, 2014 WL 2602260, at
*6 (“the Court finds that allegations of ‘unconscionable commercial practice,
deception, fraud, false pretense, false promise, misrepresentation, or the
knowing concealment, suppression, or omission of any material fact’ during the
loan modification process constitute unlawful conduct in violation of the
NJCFA.”); cf Gonzalez a Wilshire Credit Cotp., 25 A.3d 1103, 1116 (N.J. 2011)
(“jCjollecting or enforcing a loan, whether by the lender or its assignee,
constitutes
.
.
.
an activity falling within the coverage of the CPA.”).
Accordingly, 1 would not grant summary judgment dismissing the
Reymans’ CPA claim on the threshold basis that it is barred as a matter of law.
ii. Merits of CFA Claim
I therefore turn to the merits of the CFA claim. Here, I find that the
Heymans have failed to raise a factual issue as to Ciii’s commission of an
unlawful or deceptive business practice in connection with the RAMP process.
The CPA was passed to address “sharp practices and dealings in the
marketing of merchandise and real estate whereby the consumer could be
victimized by being lured into a purchase through fraudulent, deceptive or
other similar kind of selling or advertising practices.” Daaleman v.
Elizabethtown Gas Co., 77 N.J. 267, 271 (1978). As “remedial legislation,” the
NJCFA “should be construed liberally.” Int’l Union of Operating Engineers Local
No. 68 Welfare Fund a Merck & Co., 192 N.J. 372, 377 n. 1 (2007) (hereinafter
“IUOEL 68”).
The relevant portion of the CFA provides as follows;
[t]he act, use or employment by any person of any unconscionable
commercial practice, deception, fraud, false pretense, false
58
promise, misrepresentation, or the knowing, concealment,
suppression, or omission of any material fact with intent that
others rely upon such concealment, suppression or omission, in
connection with the sale or advertisement of any merchandise or
real estate, or with the subsequent performance of such person as
aforesaid, whether or not any person has in fact been misled,
deceived or damaged thereby, is declared to be an unlawful
practice.
N.J. Stat. Ann.
as “the attempt
§ 56:8-2. The term “advertisement” is defined, in relevant part,
.
.
.
to induce directly or indirectly any person to enter or not
enter into any obligation or acquire any title or interest in any merchandise
or to make any loan.” N.J. Stat. Ann.
§ 56:8-1(a).
To state a claim under the CPA, a plaintiff must allege the following three
elements: (1) unlawful conduct by the defendants; (2) an ascertainable loss on
the part of the plaintiff; and (3) a causal relationship between the defendants’
unlawful conduct and the plaintiff’s ascertainable loss. JLJOEL 68, 192 N.J. at
389; see D’Argenzio v. Bank of Am. Corp., 877 P. Supp. 2d 202, 208 (D.N.J.
2012). Importantly, “[u]nlike common law fraud, the NJCPA does not require
proof of reliance.” Marcus v. BMWof N. Am., LLC, 687 P.3d 583, 606 (3d Cir.
20 12) .45
Unlawful conduct falls into three general categories: affirmative acts,
knowing omissions, and violation of specific regulations under the CFA. N.J.
Stat. Ann.
§ 56:8-2, 56:8-4; Cox v. Sears Roebuck & Co., 138 N.J. 2, 17 (1994).
An affirmative misrepresentation under the CFA is “one which is material to
the transaction and which is a statement of fact, found to be false, made to
induce the buyer to make the purchase.” Mango v. Pierce-Coombs, 370 N.J.
Super. 239, 250-5 1 (App. Div. 2004) (internal quotations and citation omitted);
see Arcand, 673 F. Supp. 2d at 296-97. Affirmative acts must be “‘misleading’
and stand outside the norm of reasonable business practice in that it will
victimize the average consumer.” New Jersey Citizen Action u. Schedng-Plough
Citi argues contractual ratification in the analysis of their CFA claim, but fail to
cite case law that has applied contractual ratification to a consumer protection action.
(DSJBr at 17-19).
59
Corp., 367 N.J. Super. 8, 13 (App. Div. 2003) (quoting Turf Lawnmower Repair,
Inc. v. Bergen Record Corp., 139 N.J. 392, 429 (1995)).
“There is no precise formulation for an ‘unconscionable’ act that satisfies
the statutory standard for an unlawful practice.” D’Agostino v. Maldonado, 216
N.J. 168, 184 (2013). The CFA “establishes ‘a broad business ethic’ applied ‘to
balance the interests of the consumer public and those of the sellers.” Id.
(quoting Kugler v. Romain, 58 N.J. 522, 543-44 (1971)). “Often, the
determination of whether business conduct ‘stand[s} outside the norm of
reasonable business practice’ presents a jury question.” Hassler v. Sovereign
Bank, 644 F. Supp. 2d 509, 514 (D.N.J. 2009), aff’d, 374 Fed. App’x 341 (3d
Cir. 2010).
A CFA claim may arise from the collection, enforcement, or modification
of a loan. See Gonzalez, 25 A.3d at 1116 (“[C]ollecting or enforcing a loan,
whether by the lender or its assignee, constitutes... .an activity falling within
the coverage of the CPA” and disapproving financing deals that turned debtors
into “cash cows” without ever restoring their mortgages to current status);
Block, 221 F. Supp. 3d at 594 (“courts in this Circuit have held that
misrepresentations regarding mortgage modifications fall within the NJCPA,
since they are made in connection with the ‘subsequent performance’ of a
mortgage under the statute.”); Arias, 439 N.J. Super. at 277 (“an agreement
that purports to bind a debtor to make payments while leaving the mortgage
company free to give her nothing in return” may violate CFA); Laughlin, 2014
WL 2602260, at *6 (“a loan servicer’s business practices during the loan
modification process are covered by the CFA”).
The underlying allegations of unlawful conduct are familiar, and have
been discussed elsewhere in this opinion: The Heymans were misled into
believing that they were being considered for a “RAMP-compliant” modification,
which they did not receive; the May 16, 2013 payment should have been
applied as a TPP payment; a Citi representative advised the Reymans by
telephone that they would receive a 2% interest rate; the modified loan
60
payments exceed 31% of the Heymans’ gross income; and Citi failed to waive
late fees. (See SAC ¶3j47, 50-52; PSJBr at 18-21).
I have already held that the submissions of the Heymans fail to create a
triable factual issue as to these factual allegations of wrongful conduct. See
Section IV.D.ii., supra. For the reasons stated above, then, Citi is entitled to
summary judgment dismissing the CPA claim.
I. Real Estate Settlement Procedures Act (“RESPA”)
Citi moves for summary judgment on the Heymans’ RESPA claim on
three bases: (1) Mr. Heymans’ request to the CFPB and 0CC were not “qualified
written requests” under RESPA; (2) Citi nonetheless responded to Mr.
Heymans’ complaints on October 25, 2013 via letter (Pamela Decl. Ex. M); and
(3) the Heymans have not established any damages as result of Citi’s alleged
RESPA violation. (DSJBr at 39-40).
The Heymans admit that Citi responded to their August 2013 complaints
to the CPPB and the 0CC. (PSJBr at 32-34). They challenge the sufficiency of
Citi’s response. (See PSJBr at 34 (“Here, the CMI response was lacking in
information, and claimed that certain fees could not be adjusted due to
‘contractual requirements.’ This is not a meaningful answer.”)). The Heymans
do not address Citi’s arguments regarding damages. (See PSJBr at 32-34).
In Section Ii, I summarize the RESPA framework at some length. In
Section I.ii, I state the far narrower grounds to grant summary judgment.
When asked to identify “all facts” relating to Citi’s unlawful conduct upon which
the Heymans’ CFA claim is based, the Heymans attested as follows:
Defendant engaged in a course of continuous conduct that reasonably
induced Plaintiff into believing that he was being considered for a
mortgage modification under the RAMP guidelines. In addition, the
Defendant collected Plaintiffs payment that was intended for payment
under the TPP and Defendant knew or should have known this, as they
did not accept payment prior to the payment of May, 2013, which was
converted by the Defendant. Despite affirmative statements that the
Plaintiff was being considered for a modification under RAMP guidelines,
Defendant did not render Plaintiff a modification in conformity with the
RAMP guidelines.
46
(DE 104-4, Ex. B, Interrogatory No. 18).
61
1.
RESPA Framework
“RESPA establishes a mechanism for borrowers to obtain information
from and to contest errors made by their mortgage servicers.” Schepisi V.
Santander Bank, N.A., 2019 WL 699959, at *2 (D.N.J. Feb. 20, 2019). To that
end, the statute requires that servicers of mortgage loans respond to inquiries
from borrowers regarding their loans within a set amount of time. See 12
2605. RESPA simply requires that, upon “receipt” of a Qualified
Written Request (“QWR”), a loan servicer must “provide the borrower with a
written explanation” that includes “a statement of reasons for which the
§
U.S.C.
servicers believes that the account is correct.” 12 U.S.C.
§
2605(e)(2)(B);
Hutchinson v. Del. Say. Bank FSB, 410 F. Supp. 2d 374, 382 (D.N.J. 2006)
(RESPA requires sen’icers to “(a) provide written notice to the borrower
acknowledging receipt of the request; (b) take appropriate action with respect to
the inquiry either by making corrections or providing a written explanation or
clarification; and (c) protect the borrower’s credit rating by not reporting”
overdue payments related to the QWR).
RESPA defines a QWR as follows:
a qualified written request shall be a written correspondence, other
than notice on a payment coupon or other payment medium
supplied by the servicer, that—
(i) includes, or otherwise enables the servicer to identify, the
name and account of the borrower; and
(ii) includes a statement of the reasons for the belief of the
borrower, to the extent applicable, that the account is in
error or provides sufficient detail to the servicer regarding
other information sought by the borrower.
12 U.S.C.
§
2605(e)(l)(3).
The regulations promulgated under RESPA permit a servicer to “establish
an address that a borrower must use to request information,” provided that the
servicer provides written notice of the designated address to the borrower. 12
C.F.R.
§
1024.36(b) (emphasis added); see also 12 C.F.R. §1024.35(c). “[Ijf a
62
servicer establishes a designated QWR address, ‘then the borrower must deliver
its request to that office in order for the inquiry to be a ‘qualified written
request.”’ Roth u. CitiModgage Inc., 756 F.3d 178, 181 (2d Cir. 2014) (quoting
Real Estate Settlement Procedures Act, Section 6, Transfer of Servicing of
Mortgage Loans (Regulation X), 59 Fed. Reg. 65,442, 65,446 (Dec. 19, 1994)).
Ignoring an QWR address carries harsh consequences for the borrower. Wease
v. Ocwen Loan Servicing, L.L.C., 912 F.3d 768, 776 (5th Cir. 2019), aff’d in part,
rev’d in part on other grounds, 2019 U.S. App. LEXIS 4375, at *15 (5th Cir. Feb.
13, 2019).
The U.S. Court of Appeals for the Third Circuit has not yet ruled on
whether failure to submit a request to the designated address provides grounds
for the dismissal of a RESPA claim. Every other Circuit to address this issue,
however, has held that a servicer is not required to respond to a “misaddressed
QWR
—
and that responding to such a letter does not trigger RESPA duties.”
Id. (citing Bivens v. Bank ofAm., N.A., 868 F.3d 915, 921 (11th Cir. 2017)
(“Because [the borrower] failed to address his QWR to Ithe seiwicer]’s
designated address for QWR receipt, [the servicer] had no duty to respond to
it.”); Roth, 756 F.3d at 18 1-82 (“[F]ailure to send the request to the designated
address does not trigger the servicer’s duties under RESPA.”); Bemeike v.
CitiMortgage, Inc., 708 F.3d 1141, 1149 (10th Cir. 2013) (“Receipt at the
designated address is necessary to trigger RESPA duties.”).47
But see McMillen v. Resurgent Capital Sews., L.P., 2015 U.S. Dist. LEXIS
121379, at *15 (S.D. Ohio Sep. 11,2015) (“[T}he crucial inquiry is whether the
received the borrower’s correspondence, because the statutory
mortgage
language indicates that receipt triggers the servicer’s duty to respond under RESPA.”);
Benner u. Bank of America, NA, 917 F. Supp. 2d 338 (E.D. Pa. 2013) (evaluating 24
C.F.R. § 3500.2 1(e)(1) and concluding that plain language does not require borrower to
use designated address).
Both Benner and McMillen emphasize that the language of the statute itself does
not mandate that correspondence be received at a specific address in order to trigger
RESPA obligations. As noted in McMilIen, however, most courts which have analyzed
this issue have disagreed with the reasoning articulated in Benner. McMillen, 2015
U.S. Dist. LEXIS 121379, at 15 Benner was decided before Benzeike, which was the
first decision from a Court of Appeals to address the issue. In Bemeike, 708 F.3d at
1148, the Tenth Circuit noted that Congress had not defined the requirements for
47
servicer
63
RESPA provides for three different courses of action on the part of the
servicer after receiving a QWR. 12 U.S.C.
corrections to the account. 12 U.S.C.
§
§
2605(e)(2). A servicer can make
2605(e)(2)(A). A servicer can, after an
investigation, provide the borrower with a written explanation or clarification
that explains why certain information cannot be obtained or provided by the
servicer.
12 U.S.C.
§
2605(e)(2)(C).
The last manner of response, the only one applicable here, provides that
a servicer shall:
(B) after conducting an investigation, provide the borrower with a
written explanation or clarification that includes—
(i) to the extent applicable, a statement of the reasons for
which the servicer believes the account of the borrower is
correct as determined by the servicer; and
(ii) the name and telephone number of an individual
employed by, or the office or department of, the servicer
who can provide assistance to the borrower.
12 U.S.C.
§
2605(e)(2)(B).48
Section 2605(e)(2J(BJ requires only that the loan servicer provide “a
statement of the reasons for which the servicer believes” the accounting is
“receipt’ of a QWR, and the legislative history’ failed to provide useful guidance on how
Congress would have interpreted when a QWR is deemed received for purposes of the
imposition of statutory duties. Because Congress was silent and the Consumer
Protection Bureau was empowered to “prescribe such rules and regulations, to make
as may be necessary to achieve the purposes of’ RESPA, the
such interpretations
Tenth Circuit Court of Appeals considered and adopted the agency’s interpretation of
the statute, as reflected in the relevant regulation mandating receipt at the
designated address. The Bureau interpreted the statute to allow scn’icers the option of
requiring borrowers to submit QWRs through a designated address.
“Communication failing to meet the requirements of RESPA and its
implementing regulation amounts to nothing more than general correspondence
between a borrower and servicer,” and does not trigger RESPA. Id. at 1149. Allowing
seiwicers to designate an exclusive address for QWRs does not defeat the intention of
RESPA and provides consumers “greater and more timely information on the nature
and costs of the settlement process.” Id. at 1148-49.
48
Because these three methods of compliance are presented in the disjunctive, a
servicer is hot required to employ more than one. Moreover, § 2605(e)(2)(A) and (B) are,
in most factual scenarios, mutually exclusive.
.
.
.
servicer’s
64
correct. (Emphasis added.) “Under RESPA, it is irrelevant whether the servicer’s
understanding of the loan modification agreement is correct, so long as it is
reasonable.” Vassalotti v. Wells Fargo Bank, N.A., 732 F. Supp. 2d 503, 509
(ED. Pa. 2010). In other words, “[a] reasonable explanation of the servicer’s
belief is sufficient, even if it is later determined that the belief is erroneous.” Id.
(holding that servicer’s response to borrower’s QWR regarding escrow account
was reasonable because there was “an open question of contract interpretation
with respect to whether the May 22, 2008 agreement capitalized the escrow
deficit into the modified loan balance,” and that if servicer’s “interpretation is
incorrect,” then “that error is properly the subject of a breach of contract
claim,” not a RESPA violation) (citing Gruninger z.’. America’s Servicing Co., No.
08-572, 2010 U.S. Dist. LEXIS 15139, at *15 (E.D. Pa. Feb. 22, 2010) (finding
no RESPA violation where defendant “responded to all of the plaintiff’s letters
and, among other things, provided detailed explanations” for its reasoning)).
Finally, in order to succeed on a RESPA claim, the Heymans must
establish that they suffered actual damages. 12 U.S.C.
§
2605(0(1). This
requirement has two components: actual harm and causation.
RESPA allows for recovery of “any actual damages to the borrower,” as
well as statutory damages in the case of “a pattern or practice of
noncompliance.” 12 U.S.C.
§
2605(O(1)(A) (providing that “[wjhoever fails to
comply with any provision of this section shall be liable to the borrower for
each such failure in the following amounts: in the case of any action by an
individual, an amount equal to the sum of.
.
.
any actual damages to the
borrower as a result of the failure”). “Actual damages encompass compensation
for any pecuniary loss including such things as time spent away from
employment while preparing correspondence to the loan
servicer,
and expenses
for preparing, photocopying and obtaining certified copies of correspondence.”
Cortez v. Keystone Bank, Inc., 2000 WL 536666, at *12 (E.D. Pa. May 2, 2000).
In terms of statutory damages, “[n]umerous courts have held that a plaintiff
cannot properly establish entitlement to additional statutory damages based
65
upon a single violation of the statute.” Binder v. WeststarMortg., Inc., 2016 U.s.
Dist. LEXIS 90620, at *4243 (E.D. Pa. July 13, 2016) (citing cases).
However, “alleging a breach of RESPA duties alone does not state a claim
under RESPA.” Hutchinson, 410 F. Supp. 2d at 383. A plaintiff must, “at a
minimum, also allege that the breach resulted in actual damages.” Id. (citing
Cortez v. Keystone Bank, 2000 U.S. Dist. LEXIS 5705 at *40 (E.D. Pa. May 2,
2000) (claimant under 12 U.S.C.
§ 2605 must allege pecuniary loss attributable
to alleged RESPA violation)); see also Straker v. Deutsche Bank Nat’l Trust, 2012
WL 7829989, at *11 (M.D. Pa. Apr. 26, 2012) (“the borrower has the
responsibility to present specific evidence to establish a causal link between
the financing institution’s violation and their injuries.”).
The causation element requires a plaintiff to present evidence that
damages were incurred as a result of an inadequate RESPA response as
opposed to other wrongdoing, such as damages incurred because of an
improper foreclosure or servicing of the loan. Dieddch v. Ocwen Loan Servicing,
LLC, 839 F.3d 583, 593 (7th Cir. 2016) (affirming dismissal of RESPA claim
where plaintiffs failed to put forth evidence that they were injured specifically
by defendant’s inadequate RESPA response as opposed to damage caused by
“initiating a foreclosure action, increasing interest rates, initiating a loan
modification procedure, and the like.”); Patrick v. CitiFinancial Corp., LLC, 2015
U.S. Dist. LEXIS 118969, at *13 (M.D. Ala. Sep. 8, 2015) (finding that asserted
damages, including loss of equity and use of property, were due to foreclosure,
not inadequate RESPA response); Clark v. Bank of Am., N.A., U.S. Dist. LEXIS
85135, at *16 (E.D. Mich. June 18, 2013) (holding that plaintiff failed to plead
causation where the alleged harm “occurred prior to the time period of when
the QWR was sent.”); Meniatti v. NationstarMortg., LLC, 2013 U.S. Dist. LEXIS
146327, at *2122 (E.D. Mich. Oct. 10, 2013) (granting summary judgment on
RESPA claim where plaintiff failed to demonstrate damages as a result of
defendants’ purported RESPA violation where “the sole basis for Plaintiffs
damages is his contention that Nationstar improperly’ serviced his loan.”); Webb
66
v. Chase Manhattan Mtg. Corp., 2008 WL 2230696 at
*
14 (S.D. Ohio May 28,
2008) (dismissing RESPA claim where damages alleged would have been
incurred by plaintiff prior to QWR correspondence); Collier v. Wells Fargo Home
Mortgage, 2006 WL 1464170, *3 (N.D. Tex. May 26, 2006) (granting summary
judgment where plaintiffs had failed to allege damages specifically relating to
RESPA violation, as distinct from damages flowing from alleged improper
servicing of mortgage).
ii.
Analysis of the Heymans’ RESPA claim
Citi alleges that it has designated a specific address for RESPA requests,
and that the Heymans failed to submit their complaints to that designated
address. (DSJBr at 39 (citing Pamela Decl. ¶15, Ex. L)). The monthly statement
from Citi to the Heymans includes a “customer service” section in which Citi
designated an address for QWRs. (DE 110-3, at 109, Pltf.’s Ex. D). Specifically,
the monthly statement provides as follows:
For Residential Customers Only: PURSUANT TO §6 OF RESPA, A
“QUALIFIED WRWPEN REQUEST” REGARDING THE SERVICING
OF YOUR LOAN MUST BE SENT TO THIS ADDRESS:
CITIMORTGAGE, INC., AflN: CUSTOMER RESEARCH TEAM, P0
BOX 10002, HAGERSTOWN, MD 2 1747-0002. A “qualified written
request” is written correspondence, other than notice on a
payment coupon or statement, which includes your name, account
number and the reason(s) for the request.
(DE 110-3, at 109, PltL’s Ex. D).
That is a sufficient designation. A servicer may designate a QWR address
by identifying an address as a QWR address on a borrower’s monthly mortgage
statement. The Second Circuit in Roth v. CitiMortgage Inc., 756 F.3d at 182-83
reviewed and accepted the sufficiency of Citi’s designation of address provided
to borrowers in their monthly statements when evaluating RESPA claims.49 See
Berneike v. CitiModgage, 708 F.3d at 1149.
The Second Circuit’s decision quotes directly from the monthly mortgage
statement, and Citi’s designation of address in Roth is substantively the same as the
designation of address in the Heymans’ monthly mortgage statement. See 756 F.3d at
182.
4°
67
Following the Second and Tenth Circuits, I conclude that the Heymans’
complaints, which were not submitted to Citi’s designated address as stated in
the Heymans’ monthly mortgage statements, did not trigger Citi’s RESPA
duties. See In re Patrick, 2014 Bankr. LEXIS 5115, at *5152 (granting
summary judgment on RESPA claim based on Citi’s designated address in
monthly statement); see also In re Residential Capital, LLC, 533 B.R. 874, 879
(Bankr. S.D.N.Y. 2015) (concluding that letter that was not sent to designated
address on monthly mortgage statements did not qualify as QWR); Kelmetis u.
Fannie Mae, 2017 U.S. Dist. LEXIS 11169, at *23 (N.D.N.Y. Jan. 27, 2017)
(holding that servicer’s duty to respond was not triggered where customer failed
to send letter to address identified on monthly mortgage statement as the
location where QWRs “must be sent”); see also Gnffin u. Cittfinancial Morty. Co.,
Inc., 2006 U.S. Dist. LEXIS 6709, 2006 WL 266106, at *2 (M.D. Pa. Feb. 1,
2006) (dismissing RESPA claim where plaintiff sent request to Citifinancial’s
bankruptcy attorney rather than Citifinancial itself).
Accordingly, Citi is entitled to summary judgment on this claim because
its duties under RESPA were not triggered. That entitlement is not undermined
by Citi’s later having responded to Mr. Heyman’s complaints. See Bemeike, 708
F.3d at 1149 (declining to find that Citi waived its “statutory right” to receive
QWR5 at designated addresses when Citi nonetheless responded to plaintiff’s
letters complaining of errors).
Additionally, the Heymans do not address Citi’s motion based on the lack
of evidence of damages. (See PSJRr at 32-34). Typically, when an issue is not
presented in the arguments section of the brief, that issue is deemed waived.
See Travitz, 13 F.3d at 711. I have, however, examined the Heymans’ responses
to interrogatories, wherein they “itemized” the following damages:
a. Five payments, sum total in the amount of $17,438.80.
b. Defendant also recapitalized, instead of waiving various late
fees.
•c. Due to its refusal of the short sale, and demand for a $10,000
payment, the plaintiffs have been forced to remain in this
68
horrendous situation of owning a house that is underwater due
to defendant’s reckless lending practices.
d. Plaintiffs’ credit is wrecked, and they are unable to purchase
another house, and are unable to access credit normally as they
would have been if they had been able to sell this house at a
short sale.
e. Emotional distress does not lend itself to easy calculation, nor
do punitive damages.
f.
Plaintiffs have incurred attorney fees owing to Citi’s breach of
the covenant of good faith and fair dealing and other tortious
and illegal behavior as described in the SAC.
(DE 104-4, at 31, Def.’s Ex. B). These categories of damages, whatever their
validity, have not been factually linked to an inadequate RESPA response, as
opposed to the Heymans’ other complaints about the loan modification process.
On the additional basis of failure to establish damages or damages causation,
then, summary judgment is warranted on the Heymans’ RESPA claim.
The Court concludes that the Heymans’ RESPA claim fails because (1)
RESPA was not triggered by the Heymans’ correspondence to CFPB and 0CC;
and (2) the Hevmans’ have not presented any proof of damages that can be
traced to an inadequate RESPA response. Accordingly, the Court does not
address additional arguments concerning the sufficiency of Citi’s response.5°
SD
Although not addressed by the parties, it appears that the Heymans face
another bar to their RESPA claim. A qualified written request must be related to “the
servicing of [the] loan.” 12 U.S.C. § 2605(e)(1)(A)-(B) (emphasis added). RESPA defines
servicing as “receiving any scheduled periodic payments from a borrower pursuant to
and making the payments of principal and interest and
the terms of any loan,
such other payments with respect to the amounts received from the borrower as may
be required pursuant to the terms of the loan.” 12 U.S.C. § 2605(i)(3). RESPA’s
definition of servicing narrowly focuses on the exchange of “payments” between a
servicer and a borrower. 12 U.S.C. § 2605(i)(3); Hager v. CitiMortgage, Inc., 2017 U.S.
Dist. LEXIS 26900, at *18 (D.N.J. Feb. 27, 2017) (concluding that “‘servicing’ cannot
be so broadly read as to encompass documents and information that are merely
related to other aspects of the loan, such as its origination, transfer, or continuing
validity.”).
Accordingly, requests for information that do not relate to “servicing” a loan do
not fall within the ambit of RESPA. Courts routinely interpret RESPA “as requiring a
QWR to relate to the servicing of a loan, rather than the creation or modification of a
*9 (ED. Cal.
loan.” Gates v. Wachovia Mortg., FSB, 2010 U.S. Dist. LEXIS 64268, at
.
.
.
69
J. Slander of Title
The Hevmans’ slander of title claim is based on the following:
“Ciii falsely reported the plaintiffs’ debts (publication) by claiming in (among
other places) public documents recorded in official county records that
plaintiff’s lien is greater than it actually is, due to illegally charging late fees
and interest during the automatic stay and then capitalizing those charges into
*4 (D.N.J.
June 28, 2010); see Mercado a Ban/c ofAm., N.A., 2013 WL 2933217, at
June 13, 2013) (“[L]etters challenging only a loan’s validity or its terms are not
qualified written requests that give rise to a duty to respond under § 2605(e).”); see
also Medrano ii. Flagstar Bank, FSB, 704 F.3d 661, 667 (9th Cir. 2012) (concluding
that letter challenging “the terms of the loan and mortgage documents, premised on
an assertion that the existing documents [did] not accurately reflect the true
agreement” and “request[ing) modification of those documents” did not relate to
servicing loan and thus servicer’s obligations under RESPA was not triggered); Watson
v. Bank ofAm., Nat’I Ass’n, 2016 U.S. Dist. LEXIS 85580, at *15 (S.D. Cal. June 30,
2016) (finding that “requests relating to loan modification are not related to ‘servicing’
9 (Bankr.
of the loan” under RESPA); In re Bell-Wiggins, 2016 Bankr. LEXIS 4268, at
D.N.J. Dec. 6, 2016) (holding that plaintiffs had not pled RESPA violation where
“correspondence sent by Plaintiffs questions the reason for Defendants’ denial of the
loss mitigation application and alleges errors related thereto.”); Mbakpuo v. Wells
Fargo Ban/s N.A., 2015 U.S. Dist. LEXIS 94414, at *28 (D. Md. July 20, 2015) (holding
that plaintiffs “requests for a loan modification did not relate to the servicing of a loan
because they did not relate to Wells Fargo ‘receiving any scheduled periodic payments
from a borrower pursuant to the terms of a loan.”’); Mayer v. EMC Moflg. Corp., 2014
U.S. Dist. LEXIS 55521, at *14 (ND. md. Apr. 22, 2014) (“fA}ny actions related to any
loan modification are outside the term ‘servicing’, and thus cannot be pursued under
RESPA.”); Tavake u. Chase Bank, 2012 U.S. Dist. LEXIS 173411, at *11 (E.D. Cal.
Dec. 5, 2012) (“RESPA only obligates loan servicers to respond to or refrain from
acting upon a borrower’s QWR relating to the servicing of his or her loan, which does
not include a loan modification, plaintiffs’ RESPA claim fails.”); Wallace v. Bank ofAm.,
2011 U.S. Dist. LEXIS 97792, at *13 (D.N.J. Aug. 30, 2011) (“Plaintiffs written
applications for loan modification do not fall within the protections of RESPA”); Philips
a Batik ofAm. Corp., 2010 WL 1460824, at *4 (N.D. Cal. April 9, 2010) (finding
defendant had no duty to respond to plaintiffs QWR because it related to loan
modification, and not servicing); but see In re Coppola, 596 B.R. 140, 155 (Bankr.
D.N.J. 2018).
Mr. Heymans’ complaints to the CFPB and 0CC dispute the terms of the
modified loan. (See Pamela Decl. Ex. L; SAC ¶70 (“Here, plaintiff Abraham Heyman
wrote to the consumer protection agency on a QRW (complaining about the loan
modfication that Citi offered) and the document was forwarded to Citi, which answer
the plaintiffs concerns unsatisfactorily and failed to correct the noted deficiencies.”
(emphasis added)). The vast majority of case law has recognized that such a letter does
not related to “servicing” a loan, and therefore does not impose an obligation on the
servicer to respond under RESPA.
70
the loan balance.” (SAC ¶65). The crux of the claim is that “Citi published
inflated amounts of debt.
.
.
in the bankruptcy record and in county property
records and recorded a fake assignment to a US Bank trust.” (PSJBr at 31).
Citi seeks summary judgment on the Heymans’ claim of slander of title claim
because they have not established the existence of a false publication, special
damages, or malice.
Slander of title is a species of defamation. “The tort of slander of title has
been defined in New Jersey as a publication of a false assertion concerning
plaintiffs title, causing plaintiff special damages.” Peters Well Drilling Co. v.
Hanzula, 242 N.J. Super. 16, 24 (App. Div. 1990) (citation omitted). To
establish a cause of action for slander of title, a plaintiff must show: “(1)
publication (2) with malice (3) of false allegations concerning plaintiff’s property
or product (4) causing special damage, i.e., pecuniary harm.” Sys. Operations,
Inc. v. Scientific Games Dev. Corp., 555 F.2d 1131, 1140 (3d Cir. 1977); see also
Stewart Title Guar. Co. z,’. Greenlands Realty, L.L.C., 58 F. Supp. 2d 370, 388
(D.N.J. 1999).
The Heymans allege that the publication of the reaffirmation agreement
in the bankruptcy court and the Modification Agreement in the records of the
County clerk constitute publication of “false” statements. (Mr. Heyman Dep. II
at 337:24-338:5; DE 104-4, at 137).’ However, the Heymans have failed to
identify an actionable falsehood. The genuineness of the reaffirmation or
Modification Agreement is not disputed. The Heymans have failed to present
evidence that the substance of these documents was misrepresented.
Rather, the Heymans simply reargue their complaints about the loan
modification process and allege that Citi “clearly know ‘prior late fees’ were not
waived and acted with malice” in publishing “these fees and interest.” (PSJBr at
The Heymans also alleged that “[b]y claiming that plaintiffs owed it money that
had actually been discharged in bankruptcy, the defendant committed slander of title
against the plaintiffs.” (SAC ¶64). However, the Heymans have not pointed to anything
in the record to suggest that Citi publicized discharged debts, and their opposition
only focuses on the reaffirmation agreement.
5’
71
31). The Heymans, to be sure, have contested the RAMP-compliance of the
Modification Agreement. But they fail to show how filing of the Modification
Agreement, which they Reymans executed and agreed to, was false. The terms
of the Modification Agreement and reaffirmation agreement are accurately
reported. The interest rate in the agreement, for example, is 5.25%, and that is
what is reported in the filed document.
Moreover, the record is bereft of evidence that the Heymans suffered
pecuniary loss as a result of these publications in the records of the county
clerk or the bankruptcy court. They contend that they were “threatened with
foreclosure” and “[c]redit reports show higher debt.” (PSJBr at 31). The
Heymans further claim that they “are unable to sell or market the property.”
(PSJBr at 32). There is no obvious, plausible factual connection, however,
between the record ation of such terms (as opposed to the terms themselves)
and any damage to the Heymans. Moreover, none of these allegations of
damage are supported by citations to evidence in the record. (See PSJBr at 3132). The Court is not required to credit unsupported statements, and Rule 56
“does not impose upon the district court a duty to sift through the record in
search of evidence to support a party’s opposition to summary judgment”—
although to some degree I have done so. McCann v. Kennedy Univ. Hosp., Inc.,
596 F. App’5c 140, 146 (3d Cir. 2014) (citing American Family Life Assur. Co. of
Columbus v. Biles, 714 F.3d 887, 896 (5th Cir. 2013)); Dunkin’ Donuts Inc. v.
Patel, 174 F. Supp. 2d 202, 210 (D.N.J, 2001) (“it is not the Court’s obligation
to sift through the record searching for a genuine issue of material fact. Rather,
it is the parties’ obligation to show the absence or existence of such an issue.”).
Finally, the Heymans have not presented any proof of “special damages.”
Special damages are ordinarily proved in a slander of title action by evidence of
a lost sale or the loss of some other pecuniary advantage, such as attorney’s
fees that were incurred to clear the title. See Restatement (Second) of Torts,
633 (1979). No such proofs are proffered here.
72
§
Accordingly, summary judgment is granted as to the Heymans’ slander of
title claim.
V.
Motion to Appoint Rent Receiver
As noted above, the Heymans have maintained the two-family house as a
rental property while paying nothing on the mortgage. Citi’s second motion
seeks to assign all rental income generated from the mortgaged property to Citi,
or, alternatively, to appoint a rent receiver to collect rents, make the necessanr
tax payments for the mortgaged property, and to hold any excess monies in
trust for the protection of the mortgagee’s interest in the property. (DRRBr at 89). Citi has not, however, filed a foreclosure action against the Heymans. (DRR
Reply at 9).
Federal Rule of Civil Procedure 66 empowers a federal court to appoint a
receiver in a pending litigation.52 See Leone Indus. v. Associated Packaging,
Inc., 795 F. Supp. 117, 120 (D.N.J. 1992) (citing Donovan v. Bienuirth, 680 F.2d
263 (2d Cir. 1982), cert. denied, 459 U.S. 1069, 103 S. Ct. 488, 74 L. Ed. 2d
631 (1982)). An evidentiary hearing is warranted when the record fails to
disclose sufficient facts to warrant appointment of a receiver. Id. at 120 n.6. As
a general matter, it is appropriate for a court to appoint a receiver when the
party seeking receivership demonstrates “the imminent danger of property
being lost, injured, diminished in value or squandered, and where legal
remedies are inadequate.” Leone, 795 F. Supp. at 120 (citing McDemiott v.
Russell, 523 F. Supp. 347, 352 (E.D. Pa. 1981), affd, 722 F.2d 732 (3d Cir.
1983)); see also Barclays Bank, P.L.C. v. Davidson Ave. Assocs., Ltd., 274 N.J.
Super. 519, 524 (App. Div. 1994) (appointing receiver where because “the
52
Rule 66 provides, in its entirety, the following:
These rules govern an action in which the appointment of a receiver is
sought or a receiver sues or is sued. But the practice in administering an
estate by a receiver or a similar court-appointed officer must accord with
the historical practice in federal courts or with a local rule. An action in
which a receiver has been appointed may be dismissed only by court
order.
Fed. 1?. Civ. Proc. 66.
73
failure to pay taxes and insurance has placed Barclay’s security interest at
considerable risk.”).
Here, Citi points to a specific contractual entitlement to this relief. Most
commonly, however, the application for a rent receiver arises in a foreclosure
proceeding. “A district court, in its discretion, may appoint a receiver to collect
rents and profits and manage the property during the pendency of a
foreclosure proceeding.” United States
t’.
Berk & Beth, 767 F. Supp. 593, 597
(D.N.J. 1991). “The presence of a contractual stipulation to the appointment of
a receiver is given considerable weight in the court’s evaluation of whether a
rent receiver should be appointed.” In re Inv’rs Warranty of Am., Inc. v. B.W.E.
Dcv., L.L.C., 2010 WL 2557559, at *5 (D.N.J. June 23, 2010) (quotation and
citation omitted); Wells Fargo Bank, N.A. v. CCC All., LLC, 905 F. Supp. 2d 604,
615 (D.N.J. 2012) (recognizing that appointment of rent receiver is typically
drastic, except “where the parties have agreed cx ante that, in the event of a
default, the lender has the right to all rent payments and to the appointment of
a receive?’). However, the existence of a contractual provision “is not the only
factor to be examined
.
.
re Inv’rs Warranty of Am.,
.
the Court also considers other equitable factors.” In
Inc., 2010 WL 2557559, at *5
The court is required to consider a series of equitable factors in
determining whether to exercise its discretion to appoint a receiver:
[(1) whether] the property is inadequate security for the loan; [(2)
whether] the mortgage contract contains a clause granting the
mortgagee the right to a receiver; [(3)] the continued default of the
mortgagor; [(4)] the probability that foreclosure will be delayed in
the future; [(5)] the unstable financial status of the mortgagor; [and
(6)] the misuse of project funds by the mortgagor.
Wells Fargo Bank, N.A. v. CCC Ati., LLC, 905 F. Supp. 2d 604, 614 (D.N.J.
2012) (quotations and citations omitted; alteration added); see Phx. NPL, LLC v.
*4 (D.N.J. Dec. 16,
1130 NB Realty, LLC, 2015 U.S. Dist. LEXIS 168017, at
2015) (appointing rent receiver where borrower was in continued default,
“failed to pay property taxes and municipal water charges for the mortgaged
74
property in the amount,” and loan documents granted mortgagee right to have
receiver appointed).
Appointment of a receiver is limited to movants who have a real interest
in the property held by a defendant. Mintzer u. Arthur L. Wright & Co., 263 F.2d
823, 825 (3d Cir. 1959);5 see Cornerstone Realty Partners, Inc. v. Rabolli, 2017
U.S. Dist. LEXIS 39850, at *4 (D.N.J. Mar. 17, 2017). The right to receive the
rents upon default is entirely independent of, and in addition to, the option of
taking possession. Int’l Bus. Machines Corp. v. Axinn, 290 N.J. Super. 564, 568
(App. Div. 1996) (interpleader action to determine third-party rights to rental
income).
“Such an appointment.
.
.
should not be made lightly; it is appropriate
only in the face of compelling circumstances and in the absence of a less
drastic remedy.” Leone, 795 F. Supp. at 120; see Maxwell v. Enter. Wall Paper
Mfg. Co., 131 F.2d 400, 403 (3d Cir. 1942) (recognizing that “it has been
judicially noted almost innumerable times that the appointment of a receiver is
an extraordinary, a drastic
...
remedy
...
not to be resorted to if milder
measures will give the plaintiff, whether creditor or shareholder, adequate
protection for his rights.” (internal citations omitted)).
I address each of the equitable factors in turn. Some of them might,
other things being equal, require an evidentiaxy hearing. The record before me,
however, suffices to establish that a receiver should not be appointed at the
present time.
First, in terms of the adequacy of the property as security, Citi avers that
the value of the mortgaged property is less than the amounts due and owing
under the Note and Mortgage. Citi obtained an exterior Broker’s Price Opinion,
which estimated the value of the property as $465,000 as of May 3, 2018. (DE
103-2, at ¶4). The unpaid principal balance, as of October 26, 2018, is
The Heymans re-argue that Citi lacks standing, which they raised, and this
Court rejected, in the summary judgment motion. The Heymans’ “waiver” argument
based on the “release” of mortgage in the records of the Passaic County Clerk’s Office
is unavailing for the reasons stated above. See n.3, supra.
53
75
$516,035.09; the escrow deficiency is $77,684.77; and unpaid, accrued
interest is $92,155.47. (DE 103-2, ¶17). The Heymans have not put forth any
evidence regarding the adequacy of the property as security.
Second, the mortgage documents contain a clause that provides for the
assignment of rents or the appointment of a receiver. The clause in the original
mortgage documents allows for the “absolute” and “unconditional” assignment
of rental income in the case of default, provided that Citi gives both to the
borrower and to the tenant. (DE 103-2, Ex. 3, at 33).
Citi has given notice to the Heymans but has not given notice to the
tenants. Prior to an assignment of rents, the tenants must be given notice
under this provision. The Heymans, to some extent, have impeded Citi’s ability
to provide notice. The names (or surnames) of the tenants have been furnished,
but Mr. Heyman claims to have destroyed the leases and deposited the rental
income into a personal bank account without keeping records.
The Assignment of Rents clause allows for the unconditional and
absolute assignment of rental income from the moment notice is given, or from
April 14, 2014.
ft is not disputed that the Heymans have defaulted on their loan and
have not made a single mortgage payment since September 2013. The
Heymans, despite receiving significant rental income, have not attempted to
apply that income to the mortgage or identified any prospect of curing their
default.
The extent and seriousness of any mismanagement of funds is subject to
some dispute. Mr. Heyman has presented some indication that he has
maintained the property, spending money on a sewer line and furnace. (IDE
115-1, at ¶12). Mr. Heyman, however, has not substantiated these assertions
with documentary’ proof. (See id.). See Orange Land Co. v. Bender, 96 N.J.
Super. 158, 166 (App. Div. 1967) (“[a] mortgagee in possession is bound to
account for all rents, issues and profits received by him.., and must deduct
the allowance for these matters from the amount due on the mortgage.”).
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Regarding the probability that foreclosure will be delayed in the future,
there is no information whatever. Citi served the Hevmans with a notice of
default in 2014, but has not filed an action in foreclosure. I pressed Citi’s
counsel for an explanation at oral argument, but received very little in
response. Counsel did acknowledge that, once these motions were resolved,
filing of a state-court action in foreclosure would likely follow.
Despite the (to Citi) galling prospect of a mortgagor using the property as
a source of income while paying nothing on the mortgage, Citi’s failure to
pursue the obvious remedy of foreclosure is what gives me pause here. If Citi is
entitled to foreclose, it should do so. By bidding in its debt at a sheriffs sale, it
will accede to the rights of an owner, including the collection of rents.
Appointment of a rent receiver is a cumbersome, second-best remedy. It will
tend to prolong the twilight state of affairs in which the defaulting mortgagor
continues to own the premises, while the mortgagee enjoys most (but not all) of
the privileges of ownership, and no one has an adequate incentive to bring this
long-simmering dispute to a close. If and when Citi files an action in
foreclosure, it may seek a rent receiver in the state court. I, however, am
disinclined to grant such secondary or provisional remedies to a party which,
for whatever reason, has declined to pursue its primary remedy.
The motion for assignment of rents or appointment of a rent receiver is
therefore denied.
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VI.
Conclusion
For the reasons stated above, Citi’s motion for summary judgment (DE
104) is granted in its entirety.
Citi’s motion to assign rental income, or, in the alternative, to appoint a
rent receiver (DE 103) is denied.
An appropriate order follows.
Dated: June 27, 2019
7
United States District Judge
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A
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